Page 126 - GHES-2-4

Global Health Economics and
Sustainability
Fiscal policy shocks and health outcomes

Table 2. Unit root test results sub-regions to 0.03% and 0.05% in Eastern and Southern
Africa, respectively.
Region Variable IPS LLC
Level 1 Diff. Level 1st Diff. 4. Discussion
st
Central Public −0.08 −7.15*** −0.68 −8.62*** The significant positive effects of fiscal policy shocks
Africa expenditure
Private 0.12 −4.82*** −1.67 −6.01*** in Central and Western Africa may be explained by
expenditure the existence of well-functioning mechanisms through
Life −17.59*** −6.72*** −24.36*** −9.20*** which positive changes in fiscal operations of the central
expectancy government get cascaded to the health system and health
Eastern Public 3.36 −7.43*** 2.47 −8.80*** outcomes. These mechanisms may involve the efficient
Africa expenditure allocation and utilization of funds, as well as transparent
Private 0.71 −9.90*** −0.73 −11.65*** accountability processes. Investing in education, healthcare,
expenditure and social welfare programs can have long-term positive
Life −10.87*** −6.78*** −13.71*** −6.16*** effects on human outcomes. Improved investments in these
expectancy sectors can mitigate the adverse effect of fiscal shock and
Southern Public 0.13 −7.15*** −1.88 −6.59*** ensure sustained positive health outcomes. Further, the
Africa expenditure health systems in these sub-regions are resilient to negative
Private −1.10 −5.12*** −2.26 −6.16*** fiscal shocks. Health system resilience can be bolstered by
expenditure investments in emergency preparedness, health workforce
Life −30.92*** −15.32*** −34.17*** −16.13*** training, and health information systems. Moreover,
expectancy expanded health insurance coverage can reduce out-of-
Western Public 1.02 −6.87*** −0.36 −8.43*** pocket expenses, ensure equitable access to healthcare
Africa expenditure services, and enhance health outcomes. Thus, by relying on
Private −0.31 −7.67*** −1.65 −9.06*** alternative funding sources to provide services to people
expenditure during periods of fiscal shocks, fiscal shocks can have a
Life −12.70*** −18.85*** −18.26*** −13.55*** positive effect.
expectancy
The neutral effect of private health expenditure shocks
Notes: *, **, *** stand for 10%, 5%, and 1% level of significance, on health outcomes may be explained by its abysmal levels in
respectively. IPS: Im–Pesaran–Shin technique; LLC: Levin–Lin–Chu
technique. the regions, which implies that it is not a major determinant
of health outcomes. For example, private health expenditure
to fiscal policy produces significant impact on health per capita averaged USD19.7 in Central and Western Africa
outcomes (Panel 3), shock to private health expenditure within the study period, compared to over USD80 in other
per capita produces insignificant impact (Panel 6). Fiscal regions. Low private health expenditure may be due to high
policy shock results in a steady annual increment in health dependence on publicly funded healthcare, low income,
outcomes, starting from the 2 year and cumulating to and poor disposition for preventive healthcare services
nd
about 12 months gained by the 8 year. among citizens. These findings contradict sharply those of
th
Schakel et al. (2018) and Ifanti et al. (2013), who found that
3.3. Variance decomposition fiscal shocks could exert negative consequences on public
Table 3 shows the degree of the contribution of fiscal and health expenditure and outcomes.
private per capita health expenditure shocks to changes in The results from Central and Western Africa differ
health outcomes. In Central Africa, a greater proportion slightly from those of Eastern and Southern Africa, where
of the variations in health outcomes is attributed to fiscal fiscal and private health expenditure shocks show a neutral
policy shocks. There is an incremental impact of fiscal effect. This result suggests that public and private health
shocks over the 8-year horizon, starting from 0.02% in expenditures do not translate to health outcomes, implying
st
th
the 1 year to 0.12% in the 8 year. A similar pattern is that shocks to fiscal operations and private health spending
observed in Western Africa, from almost zero in the year, may not be transmitted to health outcomes. In both sub-
the shock occurs to 0.10% in year 8. regions, corruption, administrative bottlenecks, and human
However, in Eastern and Southern Africa, the converse capacity constraints in the health system may explain
appears to be the case; private health expenditure shock why the positive effects of public budgetary allocations
incrementally accounts for the observed variations in to the health system and private health expenditure do
health outcomes, starting from <0.01% effect in both not sufficiently get relayed to health outcomes. However,

Volume 2 Issue 4 (2024) 6 https://doi.org/10.36922/ghes.3454