Economic impact of Butaro Hospital

Published: 2019-10-10 07:00:00
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With the UN planning to launch its sustainable development goals soon, its imperative for the Rwandan government to start reflecting on how it can maximize economic growth and investment so that the country can make tremendous progress before the year 2030. As a signatory to this affirmation, they are obliged to ensure that everybody in the country, weather rich or poor has health coverage, because it is a vital pillar for development. This can only be archived if most hospitals can offer quality health care to everyone irrespective of their financial position. Built in Rwanda, which has been viewed as a nation which is among the poorest among the developing countries, with most of its population dependent on only agriculture, Butaro hospital is trying to make UHC a possibility. It acts as link between the locals and international humanitarians group, who try to help the locals gain quality health care as well as boost their economy. This paper will analyze the economic impact of Butaro hospital on the Rwandan economy by using Input-Output Multiplier Approach

Data and method used in the analysis

The data used in conducting the analysis include the fact that the Butaro hospital expenditure contributes in stimulation of other economic sectors that normally carry out business transaction with the hospital. Apart from this, the hospital also provides employment to the locals and this is an indirect way that sustains the role of the employees as consumers of other products. This data can even be more meaningful if presented quantitatively. Economic impact is normally presented quantitatively the quality of services delivered and this can be described sing the Input output table. An input output table was implemented by Leontief Wassif to aid in systematically quantifying the relationship between numerous sectors in a complex economy.

I-O table

While conducting the I-O analysis, the data used was derived from the 2000 version. This version incorporates transactions valued at producers prices and has a total of 32 sectors. The sectors applied is 32 as an alternative of 104 because medical services is classified as an transitional demand and has approximately 21 expense sectors therefore cannot correspond with 104(Cooper, R. J., University of Western Sydney, & Nepean, 1998).These 21 expense sectors are believed to fall within trade margin rates, employee income rates, consumption tendency and domestic transportation charges.

Household transportation charge rate and Trading margin rates

The concept of household transportation charge rate and Trading margin rates are clearly outlined in the study of Yusada (Jamison, Summers, Alleyne, Arrow, Berkle, Binagwaho, Yam, 2013). . In the concept, household or trading rates are calculated by dividing margin by the acquisition/ buyers price.

Employee rates

Employee income rate on the other hand is calculated by diving the sum of the employees income by the gross domestic production as contained in the input output table.

Consumption tendency

Consumption tendency on the other hand is calculated by diving the consumption costs by earnings of the workers household.

This study also used the symmetry output model to consider the impact that the hospital has on the imported and exported products. The formula used in calculating the equilibrium output is as follows:

X= (IE-(IE-M) AI)-1(IE-M) Y+E)

X represents the estimated domestic induced production value. While IE is an identity matrix also known as a square matrix, M represents imports coefficient, Y on the other hand represents domestic demand, and E is the sum of exports. Import coefficient is reached at by dividing imports and total domestic demand(Institute of Medicine , 2003).


The, I-O analysis revealed that the Butario hospital has an economic impact of approximately$5 million to the Gabon economy. This is almost a third of the total sum impacted by all hospitals in the country. The Domestic transportation charge rate and Trade margin rates clearly shows a 20% increase after the hospital is constructed. The employee rates has also increase because the hospital has created employment opportunity which means employee income and gross domestic income has increased(Cooper, R. J., University of Western Sydney, & Nepean, 1998). Consumption propensity of family has also improved because both the incomes of workers household and consumption expenditure has drastically increased. In relation to the equilibrium output model the domestic brought production value has also relatively improved due to slight increase in exports and imports.

Apart from the direct economic impact, the research also affirms that there are a lot of other benefits that proves that it was worth investing in Butaro hospital. For instance it has been identified that reduction of mortally rates normally contributes to about 11% in economic growth in developing countries . With increase in life expectancy people are normally more willing to invest of their income ,convenience or pleasure because they are confident they will still enjoy them in future. According to the I-O analysis, between 2000- 2016 24% of economic growth in Gabon is attributed to value of additional life years (VLYC). This was boosted by the construction of hospital such as Butaro Hospital.


According to the above findings, It is important for Rwanda and other developing countries to ensure that they put interest in health sector if they want to transform the life of their people economically. This is because health is vital in reducing intense poverty and advancing growth. They should implement health system oriented towards UHC just like the international community has tried to do to the locals through Butaro Hospital. As seen in the findings above Butaro hospital has had an array of benefits to the locals(Bloom, N., & National Bureau of Economic Research, 2010). For instance it has cushioned the community in times of shock and when the locals are calm it has fostered more cohesiveness which has resulted to productive economies. This means that if the government invests more in UHC there is a high probability that that it will yield a higher value than the cost they went through raising the revenue, that is cost of taxation, welfare and value that the money could have yielded if used in other sectors.

Study limitations

While conducting the study there were a lot of challenges. For instance, lack of accurate data, using only one hospital to determine the economic value instead of all medical instructions and having to do a lot of calculations and research before reaching the findings. This means that some of the data given are not so accurate because they are mere approximations. However they still give a rough picture of what is truly happening.


Conclusively, the paper analyzed the economic impact of Butaro hospital on the Rwandan economy by using Input-Output Multiplier Approach. Some of the data used to prove this include the fact that Butaro hospital expenditure contributes in stimulation of other economic sectors that normally carry out business transaction with the hospital. The economic impact is normally presented better quantitatively by the analysis which uses input output table. The table incorporates Employee rates, Consumption Propensity and household transportation charge rate and trading margin rates. `


Bloom, N., & National Bureau of Economic Research,. (2010) The impact of competition on management quality: Evidence from public hospitals. Cambridge, MA: National Bureau of Economic Research.

Cooper, R. J. (2000). An Extension of the Block Spatial Path Approach to Analysis of the Influence of Intra and Interregional Trade on Multiplier Effects in General Multiregional Input-Output Models. Advances in Spatial Science, 303-327. doi:10.1007/978-3-642-59787-9_15

Cooper, R. J., University of Western Sydney, & Nepean,. (1998). An extension of the block spatial path approach to analysis of the influence of intra and interregional trade on multiplier effects in general multiregional input-output models. Kingswood, N.S.W: University of Western Sydney, Nepean, School of Economics and Finance.

Institute of Medicine (U.S.),. (2003). A shared destiny: Community effects of uninsurance. Washington, DC: National Academies Press.

Jamison, D. T., Summers, L. H., Alleyne, G., Arrow, K. J., Berkley, S., Binagwaho, A., Yamey, G. (2013). Global health 2035: a world converging within a generation. The Lancet, 382(9908), 1898-1955. doi:10.1016/s0140-6736(13)62105-4

Summers, L. H. (2015).Economists' declaration on universal health coverage,. The Lancet, 386(10008), 2112-2113. doi:10.1016/s0140-6736(15)00242-1


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