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Effect of financial inclusion on out-of-pocket health expenditure: empirics from Ghana

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Abstract

Empirical evidence on the link between financial inclusion and out-of-pocket health expenditure remains sparse while existing studies have mainly not used a multidimensional financial inclusion index. This study examines the link between financial inclusion and out-of-pocket health expenditure in Ghana using data from the seventh round of the Ghana Living Standards Survey. To ensure robustness in findings, the standard instrumental variable (with external instruments) and Lewbel’s heteroskedasticity-based instrumental variable approaches are both applied. Our findings indicate that a standard deviation increase in financial inclusion is associated with an increase in households’ out-of-pocket health expenditure between 0.1367 and 1.7608 standard deviations. This finding is more pronounced for female-headed and urban-located households. Financial inclusion has a bigger association with expenses on medical products/appliances than on outpatient services. Policymakers are encouraged to design and implement programs to scale up the level of financial inclusion which has the potential of facilitating demand for health, thereby leading to better health outcomes.

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Notes

  1. SDG3: Ensure healthy lives and promote wellbeing for all at all ages.

  2. The external instrument is the distance to the nearest financial institution which is used in the standard IV estimation.

  3. Exchange rate is US$1= GH¢4.2679—the average daily exchange at the time of data collection (from October 2016 to October 2017. This was retrieved from the Bank of Ghana at https://www.bog.gov.gh/treasury-and-the-markets/historical-interbank-fx-rates/

  4. F-statistics from first stage regressions suggest that our instruments used in both specifications are not weak.

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Authors and Affiliations

  1. UNE Business School, Faculty of Science, Agriculture, Business and Law, University of New England, Armidale, NSW, Australia

    Isaac Koomson

  2. Department of Banking and Finance, University of Professional Studies, Accra, Ghana

    Abdallah Abdul-Mumuni

  3. Department of Economics, Faculty of Social Sciences Education, University of Education, Winneba, Ghana

    Anthony Abbam

  4. Network for Socioeconomic Research and Advancement (NESRA), Accra, Ghana

    Isaac Koomson & Abdallah Abdul-Mumuni

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  1. Isaac Koomson
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Table 7 Summary statistics of variables used in the analysis
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Koomson, I., Abdul-Mumuni, A. & Abbam, A. Effect of financial inclusion on out-of-pocket health expenditure: empirics from Ghana. Eur J Health Econ 22, 1411–1425 (2021). https://doi.org/10.1007/s10198-021-01320-1

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