When the cure leaks: corruption, health spending, and health outcomes in Malawi

The common assumption that higher investment leads to improved development outcomes is challenged in the health sector by widespread corruption practices-a paradox that fundamentally challenges the effectiveness of public health spending. The current paper sought to examine the impact of health spending on health outcomes and how this relationship changes under the auspices of increasing corruption trends in Malawi.

The study employed the autoregressive distributed lag approach, bounds cointegration, and the error correction model to establish the long-run relationship among the variables for annual time series data from 1990 to 2023.

Empirical findings revealed that a one-unit increase in corruption reduces life expectancy by 0.146 percentage points and increases infant mortality by 0.0226 percentage points in the long run. In addition, while the long-run coefficient of health spending increases life expectancy and reduces under-five mortality, the contingent effect of corruption worsens the results by 0.317 and 0.149 percentage points, respectively.

These results concur with our location of corruption within the institutional hypothesis-which posit that the quality and structure of institutions determine economic performance, and the Solow swan growth model in which we see corruption as an externality and source of inefficiencies, reducing the productivity of public investment in health (K) and the rate of technological progress (A(t)). Importantly, we made various policy suggestions, such as tying health expenditure to measurable outcomes to ensure efficiency and reduce leakages of public funds.