Human Capital Development and Public Health Expenditure: Assessing the Long-Term Sustainability of Economic Development Models

This study investigates the role of public health expenditure on human capital development in South Africa to promote economic development. Despite extensive public health investments and economic reforms, persistent socioeconomic challenges such as poverty, unemployment, and inequality impede sustainable economic growth. This study uses an autoregressive distributed lag model, a vector error correction model (VECM), quantile regression, and Granger causality analysis to assess the relationship between fiscal health policies and human development. The findings confirm that government health spending significantly enhances human development in the short and long run, while unemployment and population growth exert adverse effects. VECM variance decomposition results indicate that the influence of public health expenditure remains persistent, though diminishing over time, with growing contributions from unemployment. Quantile regression shows the heterogeneous impact of health spending across different levels of economic development, emphasising its greater effectiveness at higher development stages. Causality analysis reveals a unidirectional relationship from public health expenditure to human development; this shows the need for sustained healthcare investment. The study calls for policies combining health spending with economic strategies to boost productivity, reduce inequality, and promote inclusive growth. Strengthening institutional efficiency and ensuring macroeconomic stability are crucial for maximising long-term human capital to promote sustainable development.