This study attempts to find out the determinants of household healthcare expenditure. The analysis uses a multi-equation recursive estimation procedure to study the determinants of healthcare expenditure. First, it uses a binary logit model to estimate the probability of being ill, which is then used as an independent variable in the second stage logit model for provider choice. Ordinary Least Squares (OLS) estimates are obtained instead of Tobit estimates for the parameters of healthcare expenditure model in the third stage. This study brings out several interesting findings. First, the level of income has a significant effect on peoples' choice of healthcare provider and on the amount of healthcare expenditure. Second, people with smoking habits and less access to safe drinking water and sanitary toilets are more vulnerable to diseases. Some of the factors ordinarily believed to affect the incidence of diseases like, education level of an individual, education level of the household head, and being male member of the family have a less pronounced effect on reporting illness and healthcare expenditure.

From 1967 to 2006, Oman’s Gross Domestic Product (GDP) grew at an annual rate of about 5%, rising from 502 mn Omani rial (OMR) in 1967 to 13,266 mn OMR, at current 2000 prices. Per capita income grew at 4% a year, reaching 2,824 OMR in 2006, at constant 2000 prices. Oman was able to achieve such unprecedented levels of growth because of oil discovery in 1964 and the oil export boom that started with the 1973 international oil price rise. Oil exports earnings, at current prices, grew at 5% per year between 1970 and 2006, accounted for 40% of GDP and earned the country 5,528 mn OMR of foreign exchange in 2006. During the oil export boom, from 1974 to 1985, GDP grew at about 9% per year, and GDP per capita income increased by 5% per year, at constant 2000 prices.

Oman’s impressive GDP growth rates were obtained despite uncertainties surrounding the future of the economy. The uncertainty stemmed from the inability to predict future incomebecause of the volatility of the international oil price and due to the expectation that oil production would start to decline by 1977. Indeed, the First Five-Year Development Plan (1976-1980) estimated that by 1977, oil production would decline gradually and that by 1987 Oman would have exhausted most of its oil. The Development Council of the Omani government predicted that by the year 1977 there would be a gradual decline in oil production. The plan stated that, “since oil is the main source of Oman’s national income, the decline of oil revenues will inevitably be reflected in reductions in the gross national product unless measures are taken in the Development Plan to increase the value added in other sectors of the economy” (Development Council, 1976). It is clear from the outset, that policy planners in Oman recognized the importance of diversifying the source of income by investing in other sectors of the economy such as manufacturing, non-oil mining, agriculture and fisheries. This paper aims to look at the role of oil resources in the Omani economy, particularly the dependence of the economy on this commodity will illustrate the dynamics of mineral resources and their impact on the output of this small open economy.

Applied Economics Journal, Mineral Sector, Non-Mineral Sector, Granger Causality Tests, Gross Domestic Product, GDP, Omani Economy, Development Council, GDP Growth Rates, Development Council, Human Development Index, International Monetary Fund, IMF, Omani Oil Dependency, Financial Statistics, Vector Autoregression, VAR Models.