Does health investment matter for productivity growth in sub-Saharan Africa? Empirical insights from income and regional economic grouping perspectives

Abstract

Abstract This study investigates whether investment in the health sector matters for achieving sustainable growth via the Dumitrescu–Hurlin heterogeneous panel non-granger causality test and the dynamic panel threshold model for 28 sub-Saharan African countries (SSA). We report evidence of a bi-directional causality between health investment and productivity growth in the panel of SSA and find that investing a substantial part of GDP (about 7.96%) into the health sector is necessary to increase productivity growth in SSA. When we control heterogeneity in our sample using the regional economic grouping, we report unidirectional causality across some panels, and variations in the estimated threshold with higher values for all groups except ECOWAS with 5.82%. Using the World Bank income classification, we also find varying evidence of no causal relationship between health investment and productivity growth across the panels, except in the upper-middle income group. Generally, above the threshold level, health investment has positive effects on productivity growth for all groups. We report other significant findings that are instructive to policymaking and future research and conclude that SSA countries should increase investment in the health sector to ensure greater productivity and should deepen growth-oriented policies to further stimulate investment in the health sector.