Remittances, political economy and public health expenditure: evidence from Africa

TL;DR

This study finds that remittances can both support and reduce public health spending in African countries, depending on political factors.

Contribution

The paper introduces a quantile approach to analyze remittances' impact on public health expenditure in Africa.

Findings

Remittances positively contribute to public health expenditure in African countries.

The positive effect is offset by a non-linear crowd-out in the presence of different political regimes.

The crowd-out effect is linked to household consumption, private investment, and tax revenue.

Abstract

This article revisits the argument that in the absence of good governance, remittance inflows cause the government to renege on the provision of social services and crowd out public finance where private substitutes exist. Using a quantile approach on a sample of African countries for the period 1990–2022, and after controlling for the endogeneity of remittances, the results show a positive contribution of remittances to public health expenditure, which tis annihilated into a non-linear crowd-out of public health expenditure across quantiles in the presence of varied political regimes. This relationship does not change even in the presence of a health shock. The crowd-out of public health expenditure points to an indirect effect of remittances through household consumption, private investment and tax revenue.

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