The effect of scale on cost projections for a primary health care program in a developing country

Accurate estimation of the recurrent costs of primary health care (PHC) activities is essential in light of the need for governments to assess whether and how these costs can be financed. This paper argues that expansion of the PHC activities will result in diseconomies of scale that are not captured by constant average cost projections of recurrent costs. An alternative estimation method which captures the effect of rising average unit costs is proposed with application of this method to data from the Republic of Niger. Results of the analysis show that the 'r-coefficient' (ratio of investment to recurrent costs) for PHC activities can double and costs can be 3 times larger after 12 years.