The Relationship Between Government Health Expenditure and Economic Growth: an Analysis of Kenya: 1975 - 2020

Abstract

Health is a substantial pointer to economic growth and development. To generate new knowledge and skills and realize long-term advantages, economies require a healthy labour force. Studies done in health economics have shown that government health expenditure partly explains changes in economic growth. From a macroeconomic standpoint, investments in workers, health boost population health, which, in turn, increases productivity. There is existing literature on a connection between government health spending and economic growth, but there are hardly studies in Kenya on the effect of health on economic growth. This research paper aims to close this gap by determining how government health spending affects Kenya's economic growth. The study used the Solow model that introduced numerous components of estimation using log-log Autoregressive Distributed Lag (ADL) model, the key findings showed presence of a positive (coefficient = 1.407203) and a significant relationship (p = 0.009) between health spending per capita and the GDP per capita. From this perspective, the Kenyan government should efficiently allocate substantial amount of budget funds to the health sector, given that health expenditure necessitates substantial amount of economic growth.