Effect Of Investment In Healthcare On Economic Development In Kenya

Abstract

Economic development can generally refer to an increase in a country's ability to produce goods and services identified by factors such as production, income and spending. Investment in health in this way becomes a significant variable for economic growth or development since investments in different components of health can lead to improved human capital. Kenya has low investment in the health sector which may adversely affect economic development. The purpose of this study was to explore the effect of investment in health on the economic development in Kenya. The specific objectives were to investigate the effect of public investment in health, private investment and investment in health by international nongovernmental organizations on the development of the economy of Kenya. A descriptive research design was used in this study. Secondary time series data for 32 years (1985-2016) was collected from Kenya National Bureau of Statistics (KNBS), Institute of Economic Affairs (EIA), World Bank, Ministry of Finance and Ministry of Devolution and Planning. Data analysis was conducted using Stata statistical software. VECM time series model was fitted to the data. Augmented Dickey Fuller unit root test and Johansen test of cointegration were conducted to ensure stationarity of the data. The study results suggested that both public investment in health (β = 0.1149; p < 0.05) and private investment in health sector (β = 0.2407; p < 0.05) have significant positive effect on economic development. The study results, however, showed that investment in health sector by INGOs have no significant effect on economic development in Kenya (β = 0.3232; p > 0.05). The study makes the following recommendations. First, the government should channel more funding to the health sector as the current funding of 3.4% of GDP falls below the 7% set by the Abuja Declaration in 2001. Secondly, private entities should be encouraged to increase their investment in the health sector in the country. Lastly, the ministry of health and other government stakeholders should partner with INGOs and come up with a framework to ensure that INGOs increase their funding to financial deficit health sector units or activities. Moreover, the INGOs and government should have a governance framework to ensure that financing by INGOs is effectively utilized.