Health Expenditure and GDP Growth in Botswana

Botswana has always been recognised as an economically stable and upper middle income country in Sub- Sahara Africa, very often celebrated as a model economy for its prudential fiscal management. In 2009 Botswana become one of the few countries which have met the Abuja targets in per capita health expenditure. Amidst a high literacy rate and reasonably high economic growth, health expenditure being the highest among the SADC countries, Botswana has the HIV/AIDS prevalence which is one of the highest in the African continent. A stable relationship between health expenditure growth and income growth is crucial for health policy formulation. Four issues associated with health expenditure in the estimation of income elasticity which have not been adequately addressed in earlier studies are role of technology, heterogeneity of the health expenditure, treatment of structural break and dynamic aspects of health expenditure. This paper attempts to address these issues while estimating the income elasticity of health expenditure for Botswana considering both macro-data for 1981-2016, and micro-data drawn from the Household Income Expenditures Surveys, 1993/94 and 2003/04 according to residence status. Our results for Botswana indicate that the health care is a necessity at least in the short run. This is in contrast to the available evidence for other countries especially among upper middle income and in Africa.