Analyzing the Role of Health Investments in Driving Economic Growth: Evidence from Rwanda

Background This study investigates the relationship between health investments and economic growth in Rwanda, analyzing the role of government and private health expenditures in driving economic development in Rwanda. Methods Using Full Modified Ordinary Least Squares (FM OLS) analysis, the research examines how factors such as health expenditure, household consumption, labor force participation, and life expectancy impact economic growth. Descriptive statistics and the Augmented Dickey-Fuller (ADF) Unit Root Test were first employed to assess key variables' stationarity, which indicated non-stationary data at original levels. The study then applied FM OLS regression analysis to explore direct effects. Results The results showed that health expenditure per capita had a positive impact on economic growth, with a coefficient of 0.60, suggesting that increased health spending directly boosts the economy. Household consumption expenditure also contributed significantly, with a coefficient of 0.49, highlighting the importance of consumption in driving economic activity. Additionally, labor force participation and life expectancy had positive coefficients of 0.17 each, indicating that a healthier, more engaged workforce fosters economic output. The model accounted for 99.37% of the variation in economic growth, demonstrating a robust fit, while the Durbin-Watson statistic confirmed the absence of significant autocorrelation. Conclusion The study concludes that health investments are crucial to Rwanda’s economic development. It recommends scaling up health investments, improving healthcare infrastructure, ensuring equitable healthcare access, and addressing income inequality. Moreover, policies aimed at increasing labor force participation and fostering economic diversification are advised to enhance growth. Public-private partnerships are also suggested to amplify the benefits of health investments.