Healthcare Expenditure and Life Expectancy in Africa: A Panel Study

Objective of the Study: The study examined the nature of relationship between healthcare expenditure and life expectancy in a panel of 45 African Countries, disaggregated into different sub-regions in the continent.

Methodology: The study used fixed effect method and two-stage least square technique to investigate the relationship between life expectancy and life expectancy in the selected African countries, from 2000 to 2015. Aside from the major variables of interest, GDP per capita, basic sanitation and urban population were used as control variables. The choice of countries and time frame were based on availability of data. The data used was sourced from World Bank website, and analyzed using STATA software.

Main Findings: The fixed effect method found that healthcare spending is an important predictor of life expectancy in Africa. It was found to positively and significantly influence life expectancy in West Africa, but significantly and negatively influences life expectancy in Central and Southern regions of Africa. Contrariwise, the two-stage least square shows that healthcare spending is a negative predictor of life expectancy in Central Africa, but not a significant predictor in Eastern, Northern, Southern and Western Africa.

Conclusion: Conclusions from the study are two-fold. It can be concluded that fixed effect method is not a suitable estimation technique for models with endogeneity and reversed causation issues, and that healthcare expenditure is significant negative predictor of life expectancy in Central Africa; but not a significant predictor of life expectancy in Eastern, Northern, Southern and Western regions of Africa.