Health Expenditure and Economic Growth Nexus: An ARDL Approach for the case of Nigeria

Abstract

In this paper, the dynamic relationship between health expenditure and economic growth from 1980-2010 in Nigeria is examined – using the newly developed ARDL Bounds testing procedure and Granger causality test. The results suggest that there is a long-run relationship between health expenditure and economic growth, indicating that there is causality relationship in at least one direction. However, it does not indicate the direction of causality. Therefore, the Granger causality test indicates a strong bidirectional relationship between health expenditure and economic growth. It is therefore important for the Nigerian government to include investment in health as a tool of macroeconomic policy, due to the fact that differences in economic growth rates between countries have been significantly explained by health differences, showing that investment in health improves economic growth.

Keywords: Health expenditure, economic growth, cointegration, causality test