An investigation into the effectiveness of public health expenditure on health outcomes in South Africa

Abstract: Health holds a unique position in sustainable economic development because it is a precondition for and an outcome of economic development. The aim of this minor dissertation was to investigate the effectiveness of public health expenditure on health outcomes by estimating the health production function for South Africa. In this minor dissertation, I used infant mortality rate and life expectancy at birth as measures of health outcomes. A panel of nine provinces over the period 2005 to 2012 was used. This minor dissertation uses data from National Treasury for public health expenditure while data on health outcomes is sourced from the Health Systems Trust. Fixed effects and random effects panel data estimation techniques were used in order to control for time effects and individual province heterogeneity. This study is essential in order to assess the effectiveness of South Africa‟s health programmes and to enable evidence based policy design and implementation thereof. Results have shown that on average, an increase in public health expenditure per capita leads to improvement in health outcomes particularly infant mortality rate and life expectancy at birth. The estimated gains are largest with regards to infant mortality rate which has elasticity of -0.368 and smaller on life expectancy at birth with elasticity of 0.059. Therefore, these findings provide evidence to support the claim that public health expenditure improves health outcomes. HIV/Aids prevalence and female literacy rate were also found to be important determinants of health outcomes in South Africa. These findings are important for policy design and enhancement of our knowledge about the factors that affect health outcomes in South Africa. The key policy implication of these findings is that government should increase public health expenditure by increasing the share of public health spending within each province‟s equitable share. Furthermore, the government should increase resources towards educating women and increase the targeted interventions on HIV/Aids especially prevention of new infections.M.Com