The impact of health expenditure on life expectancy and under-five mortality : the role of institutional quality in low- and middle-income countries of Sub-Saharan Africa

Abstract

Despite the ongoing increase in health expenditure across sub-Saharan Africa, improvement in life expectancy and child survival remains uneven, thereby raising concern about the effectiveness of health expenditure in achieving better health status. This study aims to investigate the impact of health expenditure on life expectancy and under-five mortality and whether institutional quality affects the impact of expenditure on health and improve life expectancy and reduce under-five mortality in low- and middle-income countries in sub-Saharan Africa. The study’s framework is grounded in new institutional economics and the Grossman health demand theory that emphasizes the significance of institutions and health investment in improving health outcomes. In line with the methodology, this study utilized panel data across 37 Sub-Saharan African countries from 2000 to 2023, while employing the fixed-effect estimation and Driscoll-Kraay standard errors. Life expectancy and under-five mortality were used as indicators of health outcomes, while government effectiveness was used as an institutional quality indicator and health expenditure as a main explanatory variable. The empirical findings revealed that government health spending has improved life expectancy significantly in low-income countries and had a negative effect in middle-income countries. In the case of under-five mortality, health expenditures have an insignificant impact for both income groups. Government effectiveness was found to positively affect life expectancy and negatively affect under-five mortality. Furthermore, the moderating effects depicted that institutional quality reinforces the positive effect of health expenditure on life expectancy in low-income countries but is dampened in middle-income countries. The interaction between health expenditure and institutional quality did not play a significant role in the case of under-five mortality. The comparative analysis also found that the effects of health spending and institutional quality on health outcomes depend on the developmental level of countries. The study concludes that the effectiveness of health expenditure goes beyond financial investment but also an institutional setting in which health resources are managed and utilized.