Public Health Expenditure and Economic Growth in Nigeria: Testing of Wagner's Hypothesis

Abstract

The idea supporting the relationship between public expenditure and economic growth is that an increase in public spending is an inevitable consequence of economic growth. This propelled Wagner to hypothesize a connection between economic growth and public expenditure. However, arguments on the impact of public health expenditure on economic growth remain inconclusive. This study re-examined the connection between public health expenditure and economic growth in Nigeria within the context of Wagner’s theory of ever-increasing State activities. The study found evidence of a long-run relationship between public health expenditure and economic growth. The granger-causality test results, indicate neither uni-directional nor bi-directional relationship between public health expenditure and GDP. But health expenditure as a share of total government expenditure and population has a uni-directional causal relationship with real GDP. Thus, public expenditure pushes public health expenditure. It was concluded that though there is no causal relationship between public health expenditure and GDP, public health expenditure and GDP still have evidence of a long-run connection. Therefore, health insurance should be expanded to cover more people to mobilize more resources for the health sector. These may engender the required impact of health care expenditure on economic growth in Nigeria