Analysis and Implications of the Determinants of Healthcare Expenditure in African Countries

The income elasticity of health care spending in the OECD countries tends toward luxury good values. Similar studies, based on more recent data, and capable of informing macroeconomic health policies of the African countries, do not currently exist. How the health care expenditure in Africa responds to changes in the Gross Domestic Products (GDP), Official Development Assistance (ODA), and other determinants, is also relevant for health policy because health care is a necessity in the ‘basic needs’ theory of economic development. This paper presents econometric model findings of the determinants of per-capita health expenditure (in PPPs) for 26 African countries, using the flexible Box-Cox model regression methods and 1995 cross-sectional data (sources: WRI, UNEP, UNDP, The World Bank). The economic and other determinants, capturing 74 percent of the variations in health expenditures, include per-capita GDP (in PPPs), ODA (US$), Gini income inequality index, population dependency ratio, internal conflicts, and the percentage of births attended by trained medical workers. Income inequality dampens, while the ODA and population per health personnel raise health care expenditure. The GDP elasticity of about 0.6 signals the tendency for health care to behave like a technical ‘necessity.’ Implications for sustainable basic health development policies are discussed.