Does economic complexity drive health sector investment? Empirical assessment of Sub-Saharan Africa

Abstract

Ensuring sustainable public health investment is a vital global objective, as strong healthcare systems enhance life expectancy, economic productivity, and overall development. Economic complexity has emerged as a key driver of fiscal capacity and long-term prosperity, yet its direct effect on government health expenditure (GHE) remains underexplored, particularly in Sub-Saharan Africa (SSA). To bridge this gap, this study examines the relationship between economic complexity and public health expenditure in 33 SSA countries from 2010 to 2022. Employing a variety of econometric techniques—including the fixed-effects Driscoll and Kraay estimator, IV-GMM, and Lewbel IV-2SLS. The findings reveal that economic complexity significantly enhances GHE, suggesting that higher levels of technological advancement, industrial diversification, and fiscal capacity contribute to greater healthcare investment. Additionally, income taxes and industrialization are identified as key transmission mechanisms through which economic sophistication influences GHE. These results remain robust across various robustness tests, reinforcing their validity. Based on these findings, policymakers should implement strategies that foster economic sophistication, enhance tax systems, and promote industrialization to ensure sustainable healthcare financing in SSA.