Health expenditure in Botswana: A luxury or a necessity?

Abstract

This paper examines the relationship between health expenditure and income in Botswana and its implications for health policy. We employed micro-data drawn from the Household Income and Expenditures Surveys, 1993–94 and 2003–04 and macro-data from 1981 to 2016 to estimate the income elasticity of health expenditure. We estimated the arc-elasticity of private health expenditure, and the short-run and long-run income elasticity of public health expenditure, with control for the impact of technology, structural breaks, and the dynamic aspects of health expenditure. The results from the empirical estimations indicate that the demand for healthcare is a necessity in the short run and especially at the household level in Botswana. Furthermore, our results also establish that non-economic factors such as country-specific epidemiology are critical in explaining income elasticity of health expenditure.