Capital flight and public health outcomes in Africa

Abstract

AbstractMotivated by the momentous concerns over the development challenges associated with capital flight and the persistent lack of funding to improve healthcare in Africa, this study investigates the effects of capital flight on public health outcomes. Exploiting regional variations in capital flight stemming from differences in exchange rate regimes across CFA (Communaute Financiere Africaine) zone countries and non‐CFA zone countries, I construct a shift‐share instrumental variable to infer the causal effect of capital flight on health outcomes in Africa. The results show some headways toward considering capital flight as a potential threat to achieving better public health outcomes. This finding is robust to various robustness tests, including pre‐existing trend analysis, falsification tests, heterogeneity analysis, and alternative instrumental variable specifications. The study demonstrates that government spending on health and living standards are the main routes through which capital flight influences public health outcomes.