The effect of health expenditure on average life expectancy: does government effectiveness play a moderating role?

Purpose: This study investigates the impact of total health expenditure on life expectancy in a panel of 43 African countries from 2000 to 2018. Design/methodology/approach: The dynamic panel generalized method of moments (GMM) estimation method developed by Arellano and Bond (1991) is used in this study. This approach generates estimates that are heteroskedasticity and autocorrelation consistent, as well as controls for unobserved time-invariant country-specific effects and eliminates any endogeneity in the panel model. Findings: The results reveal that health expenditure on its own has a positive significant influence on life expectancy. However, health expenditure via the moderating effect of government effectiveness reduces life expectancy. The authors also observe that school enrollment and the level of economic activity significantly drive life expectancy. Research limitations/implications: The study is limited to 43 out of 54 African countries, and it covers a period of 18 years: 2000 to 2018. Practical implications: The authors argue that larger health expenditure will aid in improving the life expectancy rate in Africa. However, in practice, this would be difficult given the needs of other priority sectors. Social implications: Since most developing countries' health expenditures are small, a policy option is that healthcare services should be subsidized such that the poorest people can also access them. Originality/value: The study differs from the previous attempts, and with this, the authors contribute significantly to the literature. First, to the best of the authors’ knowledge, the authors are unaware of any study considering the role of government effectiveness as a moderating factor in investigating the effect of health expenditure on life expectancy in the African context. Thus, the authors fill a yawning gap in the literature. Second, the authors employ a recent dataset with larger sample size. Finally, to address the problem of endogeneity and simultaneity bias, the authors use the system GMM technique.