An empirical study of “the effect of health expenditure on economic growth in Uganda.”

Abstract

This study examines the effect of health expenditure on economic growth in Uganda from 1994 to 2024. Uganda faces persistent health sector challenges despite rising health spending and fluctuating economic growth. Health expenditure is a critical human capital investment that can enhance labor productivity and support long-term growth. However, Uganda’s public health spending remains low relative to international benchmarks, and out-of-pocket payments are high. There is limited country-specific evidence on whether health expenditure translates into sustained economic growth. The study employed an ARDL modeling framework to analyze both short-run dynamics and the long-run relationship between health expenditure and economic growth. The bounds test confirms the existence of a long-run cointegrating relationship between health expenditure and economic growth. The long-run results indicate that health expenditure has a positive and statistically significant effect on economic growth, supporting the health-led growth hypothesis. This suggests that increased health spending enhances economic growth through improved labor productivity and human capital accumulation. In the short run, the effects of health expenditure on economic growth are limited, implying that the growth benefits of health investment materialize gradually over time. We conclude that health expenditure is a productive long-run investment for Uganda’s economy. It is recommended that the government should increase public health financing and improve the efficiency of health spending to maximize its contribution to sustainable economic growth. Subject Keywords: Economic growth, Health expenditure, Uganda