Communicable Diseases, Health Expenditure and Economic Growth in Selected African Economies: Evidence from Fixed Effects and Instrumental Variable Estimation
Author
OKOI, Essien Jasper
Abstract
This study investigates the effects of communicable diseases and health expenditure on economic performance in eight selected African economies using balanced panel data for 2003–2022. The countries are Benin, Cameroon, The Gambia, Ghana, Nigeria, Senegal, Sierra Leone and Togo. Pooled OLS, Fixed Effects and Random Effects models are compared using formal specification tests, followed by diagnostic testing, Driscoll–Kraay robust inference and Fixed Effects Instrumental Variable Two-Stage Least Squares (FE-IV/2SLS). The F-ratio test (2,157.02, p<0.001), Breusch–Pagan LM test (413.56, p<0.001) and Hausman test (19.92, p=0.0013) favour Fixed Effects. Diagnostics reveal heteroscedasticity, serial correlation and cross-sectional dependence, motivating Driscoll–Kraay standard errors. The robust FE coefficient on current health expenditure is 0.2723 (p<0.001), while malaria is 0.0774 (p=0.019); HIV, tuberculosis and inflation are insignificant. Because health expenditure may be endogenous, FE-IV uses lagged health expenditure as an instrument. The FE-IV coefficient rises to 0.5406 (p=0.001), while malaria becomes −0.2186 (p=0.005) and HIV becomes −0.6068 (p<0.001). Tuberculosis and inflation remain insignificant. Country-specific estimates show that health expenditure is positive and significant in all eight countries, whereas disease effects differ substantially. The results indicate that health investment is positively associated with economic performance, while malaria and HIV impose measurable economic costs when potential endogeneity is addressed.
Keywords
communicable diseases; health expenditure; economic growth; Fixed Effects; instrumental variables; Driscoll–Kraay; Africa; panel data
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References
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