Healthcare expenditure and economic growth: The kenyan case (1970 - 2016).

Abstract

Given that a large chunk of the National Budget is allocated to the health care sector (31.3 Billion of the 2016/7 National Budget) it is important to establish whether it is of any consequence to output. There exists a gap in finding a link between total healthcare expenditure and economic growth in Kenya. This study seeks to establish and estimate the relationship between health care expenditure and economic growth for the period 1970 to 2016. The research design used here is historical and the data used is longitudinal. Secondary data on the GDP, total health care expenditure, gross capital formation, secondary school enrollment and labor force data is collected and following Solow (1956) an economic growth model was specified. The data is analyzed using EVIEWS software. The test for multicollinearity shows that education as the efficiency factor is highly correlated with the rest of the variables hence it is dropped from the model. The Johansen cointegration test results show that the variables are not cointegrated. An OLS Model is specified. It is found that healthcare expenditure IS positively and significantly related to economic growth as measured by real GDP.