On the efficiency of public health expenditure in Sub-Saharan Africa: Does corruption and quality of public institutions matter?

Novignon, Jacob (2015): On the efficiency of public health expenditure in Sub-Saharan Africa: Does corruption and quality of public institutions matter?

Abstract

Health expenditure in Sub-Saharan Africa (SSA) has improved over the years with several recent efforts to improve resource commitments to the health sector. Health outcomes in the region have, however, seen little improvements over the years. Several reasons, including the efficiency of health expenditure, have been given to justify this mismatch. Studies on health expenditure efficiency have mainly focused on developed regions with little attention to SSA. The objective of the study was, therefore, to examine The effects of corruption and public institution quality on efficiency. The efficiency of health expenditure was also compared across selected SSA countries. Data for the study was sourced from the World Bank's World Development Indicators for 45 countries covering the period 2005 to 2011. The two-stage Data Envelopment Analysis (DEA) was employed for the analysis. The first stage computes efficiency scores while the second stage examines the determinants of efficiency using the Tobit model. Per capita health expenditure was used as input while infant, under-five mortality and crude death rates were used as outputs. The results show that health expenditure efficiency was low with average scores of approximately 0.5. This suggests that there exist significant potential for SSA countries to improve population health outcomes given the level of expenditure. There was significant variation across countries with Cape Verde, Eritrea and Mauritius among the efficient countries while Equatorial Guinea, Sierra Leone and Swaziland were relatively inefficient. High corruption and poor public sector institutions reduced health expenditure efficiency. The findings emphasize the fact that, while increased health spending is necessary, it is also important to ensure efficiency in resource use across SSA countries. This can be achieved by effective monitoring and evaluation programmes that ensure reduced corruption and improved public institutions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Health expenditure efficiency, Tobit model, DEA, SSA, Corruption, Public institutions
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health; I - Health, Education, and Welfare > I1 - Health > I10 - General; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health

References

Afonso, A. and M. S. Aubyn (2005) 'Non-parametric approaches to education and health efficiency in OECD countries', Journal of Applied Economics, 8(2), 227-246.

Alexander, C. A., G. Busch and K. Stringer (2003) 'Implementing and interpreting a data envelopment analysis model to assess the efficiency of health systems in developing countries', IMA Journal of Management Mathematics, 14(1), 49-63.

Baily, M. N., A. M. Garber, E. R. Berndt and D. M. Cutler (1997) 'Health Care Productivity', Brookings Papers on Economic Activity. Microeconomics, 1997(ArticleType: research-article / Full publication date: 1997 / Copyright © 1997 Brookings Institution Press), 143-215.

Becker, G. (1964) Human capital, Chicago: The University of Chicago Press.

Becker, G. (1967) 'Human capital and the personal distribution of income: An analytical approach', W.S. Woytinsky Lecture no.1. Ann Arbor: Univ. Michigan.

Ben-Porath (1967) 'The production of human capital and the life cycle of earnings', Journal of Political Economy, 75, 353-367.

Bhat, V. N. (2005) 'Institutional Arrangements and Efficiency of Health Care Delivery Systems', The European Journal of Health Economics, 6(3), 215-221.

Bryan, L., M. Conway, T. Keesmaat, S. McKenna and B. Richardson (2010) Strengthening sub-Saharan Africa's health systems: A practical approach, New York: McKinsey and Company.

Caldwell, J. C. and P. Caldwell (1985) 'Education and literacy as factors in health' in Halstead, S. B., Walsh, J. A. and Warren, K. S., eds., Goof health at low cost, Ney York: The Rochefeller Foundation.

Evans, B. D., A. Tandon, L. J. C. Murray and A. J. Lauer (2001) 'Comparative efficiency of national health systems: cross national econometric analysis', British Medical Journal, 323, 307-310.

Färe, R., S. Grosskopf, M. Norris and Z. Zhang (1994) 'Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries', The American Economic Review, 84(1), 66-83.

Fuchs, V. R. (1966) 'The contribution of health services to the American economy', Milbank Memorial Fund Q., 44, 65-102.

Garber, A. M. and J. Skinner (2008) 'Is American health care uniquely inefficient?', Journal of Economic Perspectives, 22(4), 27-50.

Grossman, M. (1972) 'On the concept of health capital and the demand for health', The Journal of Political Economy, 80(2), 223-255.

Gupta, S. and M. Verhoeven (2001) 'The efficiency of government expenditure: experiences from Africa', Journal of Policy Modelling, 23(4), 433-467.

Hernandez de Cos, P. and E. Moral-Benito (2011) 'Health ecpenditure in the OECD countries: efficiency and regulation', Bank of Spain Occasional Documents No. 1107.

Herrera, S. and G. Pang (2005) 'Efficiency of public spending in developing countries: an efficiency frontier approach', World Bank Policy Research Working Paper 3645.

Jafarov, E. and V. Gunnarsson (2008 ) 'Government spending on health care and education in croatia: Efficiency and reform operations', International Monetary Fund Working Paper No. WP/08/136.

Kirigia, J. M., O. A. Mensah, C. Mwikisa, E. Z. Asbu, A. Emrouznejad and P. Makoudode (2010) Technical efficiency of zone hospitals in Benin, Brazzaville: World Health Organization Africa Region.

Kotzian, P. (2009) 'Productive efficiency and heterogeneity of health care systems: Results of a measurement for OECD countries', The Open Economics Journal, 2, 20-30.

McDonald, J. (2009) 'Using least squares and tobit in second stage DEA efficiency analyses', European Journal of Operational Research, 197, 792-798.

Mushkin, S. J. (1962) 'Health as an Investment', Journal of Political Economy, 70(2), 129-157.

Neelam, S. (2007) From funding to action: strengthening health care systems in sub-Saharan Africa, Geneva: World Economic Forum.

Powell-Jackson, T., K. Hanson and D. Mclntyre (2012) 'Fiscal space fro health: a review of the literature', Resilient and Responsive Health Systems Working Paper No.1.

Tandon, A. and C. Cashin (2010) Assessing public expenditure on health from a fiscal space perspective, Washington, DC: The World Bank.

Tlotlego, N., J. Nonvignon, L. G. Sambo, E. Z. Asbu and J. M. Krigia (2010) 'Assessment of productivity of hospitals in Botswana: a DEA application', International Archives of Medicine, 3(27).

Wagstaff, A. (1986) 'The demand for health: theory and applications', Journal of Epidemiology and Community Health, 40, 1-11.

WHO (2000) The world health report 2000. Health systems: improving performance, Geneva: World Health Organization.

WHO (2012) World health statistics 2012, Geneva: World Health Organization.

WHO (2013) World health statistics, Geneva: World Health Organization.