Reassessing the Empirical Relationship between Health Expenditure, Governance and Economic Growth in Africa: Analysis of Nigerian Data

Marius aIkpe(Department of Economics and Development Studies, Alex Ekwueme Federal University, P.M.B. 1010, Ndufu-Alike, Ebonyi State, Nigeria)
Sunday V. Agu(Department of Economics, Enugu State University of Science and Technology, PMB 01660, Enugu State, Nigeria)
Sunday A. Okwor(Department of Economics and Development Studies, Alex Ekwueme Federal University, P.M.B. 1010, Ndufu-Alike, Ebonyi State, Nigeria)

Abstract

As an aspect of human capital, a positive association exists amongst health, productivity, and growth in output per capita. On the other hand, social infrastructure defined by the institution of governance has a direct effect on the environment upon which productive activities take place to determine outcomes. Nigeria like most African countries is bedevilled by the high prevalence of inadequate health financing and poor governance. Health financing for Nigeria consistently has fallen short of the AU health funding commitment of 15% of annual budgetary allocation to the health sector. Secondly, poor governance conditions available resources and shape the state of infrastructure, particularly health infrastructure and socioeconomic conditions. In turn, this determines individuals’ level of exposure to health risks and their capacity to actively contribute to productive activity for growth stimulation and sustainability. Against this backdrop, this study added to the existing literature in the context of Nigeria, by theoretically applying the Solow augmented Mankiw-Romer-Weil structural model in the examination of the impact of government size and governance quality in the health sector, on economic growth. Autoregressive Distributed Lag (ARDL) model was adopted in the estimation. Findings show that governance quality adversely affects growth and this reduces the capacity of health spending to stimulate growth by an almost equal margin. As a result, this study recommends legislative backing to the AU health funding commitment in Nigeria.

Keywords

Public health spending; Governance; Economic growth; Solow augmented Mankiw-Romer-Weil structural model; modelNigeria

References

Ichoku, H.E., 2015. Health and Economic Development in Reverse Causality [Internet]. Available from: https://www.unn.edu.ng/wp-content/uploads/2015/09/99th-Inaugural-Lecture-Prof-Hyacinth-Ichoku.pdf

Piabuo, S.M., Tieguhong, J.C., 2017. Health expenditure and economic growth—a review of the literature and an analysis between the economic community for central African states (CEMAC) and selected African countries. Health Economics Review. 7(1), 1-13.

World Development Indicators [Internet]. World Bank; 2017. Available from: https://data.worldbank.org/indicator

Corruption Perceptions Index [Internet]. Transparency International; 2023. Available from: https://www.transparency.org/en/cpi/2021/index/nga

World Governance Indicators [Internet]. World Bank; 2021. Available from: https://info.worldbank.org/governance/wgi/

World Development Indicators [Internet]. World Bank; 2021. Available from: https://data.worldbank.org/indicator

World Health Statistics 2014 [Internet]. World Health Organization; 2014. Available from: https://apps.who.int/iris/bitstream/10665/112738/1/9789240692671_eng.pdf

Nigeria’s GDP Growth Rate 1961-2023 [Internet]. Macrotrends; 2023. Available from: https://www.macrotrends.net/countries/NGA/nigeria/gdp-growth-rate

Bakare, A.A., Olubokun, S., 2011. Health care expenditure and economic growth in Nigeria: An empirical study. Journal of Emerging Trends in Economics and Management Sciences. 2(2), 83-87.

Ogundipe, M.A., Lawal, N.A., 2011. Health expenditure and Nigerian economic growth. European Journal of Economics, Finance and Administrative Sciences. 30(4), 125-129.

Eboh, I.A., Aduku, E.B., Onwughalu, U.B., 2022. Health expenditure, child mortality and economic growth in Nigeria. International Journal of Economics Development Research (IJEDR). 3(3), 198-216.

Akinbode, S.O., Tella, S.A., 2020. Effect of health capital expenditure on economic growth in Nigeria. African Journal of Sustainable Development. 10(1), 73-97.

Olayiwola, S.O., Bakare-Aremu, T.A., Abiodun, S.O., 2021. Public health expenditure and economic growth in Nigeria: Testing of Wagner’s hypothesis. African Journal of Economic Review. 9(2), 130-150.

Adenuga, A.O., Evbuoumwan, O., 2012. Dynamics of governance, investment and economic growth in Nigeria. Botswana Journal of Economics. 10(14), 109-131.

Udah, E.B., Ayara, N., 2014. Institutions, governance structure and economic performance nexus in Nigeria. Journal of Economics and Sustainable Development. 5(3).

Adegboyega, R.R., Arikewuyo, K.A., 2020. Good governance and economic development in Nigeria. Journal of Business. 9(1), 7-22.

Wasurum, E., Tamunowariye, C., 2022. Trade openness, governance and economic growth in Nigeria. International Journal of Business Systems and Economics. 13(5), 198-211.

Rotimi, E.M., Obasaju, B.O., Lawal, A., et al., 2013. Analysis of corruption and economic growth in Nigeria. Analysis of Corruption and Economic Growth in Nigeria. 4(4.2), 1-19.

Ibraheem, N.K., Umar, G., Ajoke, F.A., 2013. Corruption and economic development: Evidence from Nigeria. Kuwait Chapter of Arabian Journal of Business and Management Review. 33(2451), 1-11.

World Health Statistics, 2015 [Internet]. World Health Organization; 2015. Available from: https://www.who.int/docs/default-source/gho-documents/world-health-statistic-reports/world-health-statistics-2015.pdf

80% of Nigerians pay out of pocket for healthcare services, survey finds. [Internet]. Science Nigeria; 2023. Available from: https://sciencenigeria.com/80-of-nigerians-pay-out-of-pocket-for-healthcare-services-survey-finds/

Nigeria launches its most extensive national measure of multidimensional poverty. [Internet]. National Bureau of Statistics; 2022. Available from: https://nigerianstat.gov.ng/news/78

Kaufmann, D., Kraay, A., Zoido-Lobaton, P., 2002. Governance matters II: Updated indicators for 2000-01. World Bank Publications:Washington, DC. DOI: https://doi.org/10.1596/1813-9450-2772

Bhargava, A., Jamison, D.T., Lau, L.J., et al., 2001. Modeling the effects of health on economic growth. Journal of Health Economics. 20(3), 423-440.

Bloom, D.E., Canning, D., Sevilla, J., 2004. The effect of health on economic growth: A production function approach. World Development. 32(1), 1-13.

Baldacci, E.B., 2004. The impact of poor health on total factor Productivity. Journal of Development Studies. 42(6), 918-938.

Greiner, A., 2005. Fiscal policy in an endogenous growth model with public capital and pollution. The Japanese Economic Review. 56, 67-84.

Agénor, P.R., 2008. Health and infrastructure in a model of endogenous growth. Journal of Macroeconomics. 30(4), 1407-1422.

Sarpong, B., Nketiah-Amponsah, E., Owoo, N.S., 2020. Health and economic growth nexus: Evidence from selected sub-Saharan African (SSA) countries. Global Business Review. 21(2), 328-347.

Kar, M., Taban, S., 2003. The impact of the disaggregated public expenditure on economic growth. Ankara University, Faculty of Political Science. 53(3), 145-169.

Yumuşak, I.G., Yıldırım, D.Ç., 2009. An econometric examination over the relation between health expenditure and economic growth. The Journal of Knowledge Economy and Knowledge Management. 7(23), 57-70.

Dauda, R.O.S., 2010. Investment in education and economic growth in Nigeria: An empirical evidence. International Research Journal of Finance and Economics. 55(10), 158-169.

Aigbedion, I.M., Anyanwu, O.A., Aiyedogbom, A., 2015. Impact of health sector public-private partnership on effective health care delivery for economic growth in Nigeria: An error correction model. International Journal of Advanced Research in Social Engineering and Development Strategies.

Campos, N.F., Nugent, J.B., 1999. Development performance and the institutions of governance: Evidence from East Asia and Latin America. World Development. 27(3), 439-452.

Aggregating Governance Indicators [Internet]. Policy Research Working Paper No. 2195; 1999. Available from: https://info.worldbank.org/governance/wgi/pdf/govind.pdf

Governance Matters [Internet]. Policy Research Working Paper No. 2196; 1999. Available from: https://ssrn.com/abstract=188568

Acemoglu, D., Robinson, J., 2010. The role of institutions in growth and development. Review of Economics and Institutions. World Bank:Washington, DC.

Acemoglu, D., Robinson, J.A., 2012. Why nations fail: The origins of power prosperity, and poverty. Crown Business:New York.

Do Governance Indicators Explain Development Performance? A Cross-Country Analysis [Internet]. ADB Economics Working Paper Series No. 417; 2014. Available from: https://www.adb.org/sites/default/files/publication/149397/ewp-417.pdf

Cooray, A., 2009. Government expenditure, governance and economic growth. Comparative Economic Studies. 51, 401-418.

Salawu, M.B., Yusuff, A., Salman, K.K., et al., 2018. Does governance influence economic growth in Sub-Saharan Africa. Global Journal of Human-Social Science: Economics. 18(1), 3-11.

Bayar, Y., 2016. Public governance and economic growth in the transitional economies of the European Union. Transylvanian Review of Administrative Sciences. 12(48), 5-18.

Afolabi, J.O., 2019. The impact of governance on economic development in West Africa: A system GMM dynamic panel approach. Editura Universitară Danubius. 15(3), 217-231.

Ovat, O.O., Bassey, E.E., 2014. Corruption, governance and public spending in Nigeria: Implications for economic growth. British Journal of Economics, Management & Trade. 4(11), 1679-1699.

Mankiw, N.G., Romer, D., Weil, D.N., 1992. A contribution to the empirics of economic growth. The Quarterly Journal of Economics. 107(2), 407-437.

Pesaran, M.H., Shin, Y., Smith, R.J., 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometric. 16(3), 289-326. DOI: https://doi.org/10.1002/jae.616

Onodugo, V.A., Ikpe, M., Anowor, O.F., 2013. Non-oil export and economic growth in Nigeria: A time series econometric model. International Journal of Business Management and Research. 3(2), 115-124.

DOI: http://dx.doi.org/10.26549/jsbe.v6i3.15893