Financial development and health care expenditure in Sub Saharan Africa Countries

Abstract

The study aimed to examine the relationship between financial development and health care expenditure in 46 Sub Saharan Africa (SSA) countries. The paper argues that health care expenditure is a key transmission mechanism through which financial development influences better health outcomes. The study used random and fixed effects as well as instrumental variable estimation methods using data from 1995 to 2014. The results showed that financial development leads to increased health care expenditure. In terms of policy implications, the findings underscore the need to foster financial development in SSA economies to assist with domestic resource mobilisation to finance health care expenditure.

Keywords:

• financial development
• health care expenditure
• random and fixed effects
• Sub Saharan Africa

Jel classification:

• E22
• E44
• G00
• I00

PUBLIC INTEREST STATEMENT

The study aimed to examine the relationship between financial development and health expenditure in 46 Sub Saharan Africa (SSA) countries. The paper argues that health expenditure is a key transmission mechanism through which financial development influences better health outcomes. The results showed that financial development leads to increased health expenditure. The findings underscore the need to foster financial development in SSA economies to assist with domestic resource mobilisation to finance health expenditure.

Acknowledgements

The author acknowledges the feedback and suggestions from the participants of the African Finance Journal Conference, 18–19 April 2018, Nairobi, Kenya.

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Jaison Chireshe

Jaison Chireshe has a PhD in Economics from the University of the Western Cape. Jaison’s research interest are in financial development, health financing and economic development.

Matthew K. Ocran

Matthew K. Ocran is a Professor of Economics at the University of the Western Cape. His research interests cover applied econometrics, development economics, development finance, financial economics, monetary policy and macro-econometric modelling. Published in a number of local and international academic journals, Prof Ocran is rated as an established researcher by South Africa’s National Research Foundation.