Public Health Expenditure and Child Mortality: Does Institutional Quality Matter?

The main objective of this paper is to test the impact of public health spending on infant health taking into account the role that institutional quality can play. We use a two-step system dynamic GMM method for 93 developed and developing countries over the1995–2015 period. Our main findings show that there is a clear positive and significant effect of health expenditure on infant mortality only for high-income countries, whereas for lower, lower-middle, and upper-middle-income ones, health spending does not have a significant impact on infant health status. Our findings show also that there is a certain threshold level that these groups must achieve to make government health spending (% GDP) positively affect infant mortality rates. This level is estimated at about 7%. Finally, estimations demonstrate also that institutional quality plays an important and significant role in mediating the relationship between health spending and IMR’s.