Health Expenditure, Economic Growth and Life Expectancy at Birth in Resource Rich Developing Countries: A case of Saudi Arabia and Nigeria

Abstract

Health care has recently been given more attention as disease and various pandemic affect the country's economic productivity. This study investigates the relationship between health expenditure, life expectancy at birth and economic growth in resource rich developing countries namely Saudi Arabia and Nigeria. The study adopts autoregressive distributed lag (ARDL) bound test, error correction model and Granger causality to determine the relationship and the direction of causality among the variables. The results establish that health expenditure and life expectancy positively influenced economic growth in the long run in both countries, though life expectancy has more impact in Saudi Arabia unlike Nigeria where health expenditure has more impact. Also, in the short run, the two variables positively influenced economic growth in the two countries except in Nigeria where the coefficient of life expectancy at birth is negative. The result also revealed one-way causality running from each of the health expenditure and life expectancy to economic growth without any feedback in the two countries. This study confirms a health-led growth hypothesis for both countries. Since health seems to promote economic growth, it becomes imperative for the government of the two countries to further strengthen the health sector with appropriate policy and funding.

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