Convergence of Health Expenditure in Sub-Saharan Africa: Evidence from a Dynamic Panel

Abstract

To address the problem of underfunding of health systems in SSA the Abuja Declaration of 2001 set a target to allocate 15% of a country’s budget to public health expenditure. However there is no empirical evidence on whether SSA countries are converging or diverging from the target and whether there is significant effect of the Abuja instrument on other health expenditure indicators. This study tested convergence of health expenditure in SSA in the post Abuja declaration period. The linear dynamic panel model was estimated by GMM-IV method on a panel of 41 SSA countries for the period 2000 to 2011. The empirical results show evidence of absolute and conditional convergence of health expenditure in SSA. Real income per capita, donor funding for health care and benefitting from HIPC debt relief influenced direction and rate of convergence of health expenditure. The Abuja policy instrument (public health expenditure as a percent of government) reduced the rate of convergence of other health expenditure measures except for private health expenditure as percent of total health expenditure which was increasing in the study. The results imply that continued reliance on donor funding for health systems directly or through debt relief is likely to delay convergence to Abuja target. SSA governments can formulate sustainable health financing mechanisms that reduce dependency on external source for health system support in the long run.

Keywords: Convergence, Health Expenditure, SSA, Dynamic Panel