Health and total factor productivity nexus in selected sub-Saharan African countries: quadratic and threshold modelling

OBJECTIVES: The sub-Saharan African (SSA) countries have been recording a decline in total factor productivity (TFP) growth, inadequate health funding and poor health outcomes are regarded as problems that might have impeded productivity in the region. This study therefore aligns with Grossman’s theory that better health could be instrumental to productivity growth. In this paper, we establish a predictive TFP model that accommodates the roles of health, which has been omitted in prior studies. To corroborate our findings we examine the threshold relationship between health and TFP. METHODS: The study employs the fixed and random effect model, panel two-stage least squares, static and dynamic panel threshold regression model on a balanced panel data of 25 selected SSA countries from 1995 to 2020 as the estimating technique for the linear relationship and the non-linear relationship between health and TFP. RESULTS: The result of the analysis reveals a positive relationship between health expenditure and TFP, health expenditure per capita and TFP. Education and other non-health factors, like Information Communication Technology (ICT) and control of corruption equally have significant positive impact on TFP. The result further shows the existence of a threshold relationship between TFP and health at 3.5% level of public health expenditure. We also discover threshold relationship between TFP and some non-health variables like education and ICT at 2.56% and 21%, respectively CONCLUSIONS: More importantly, the study confirms health as a determinant of TFP and also validates the existence of a non-linear relationship between TFP and health. Overall, improvements in health and its proxies have implications for TFP growth in SSA. Therefore, the increase in public health expenditure stipulated in this study should be passed into law for optimal productivity growth rate.