Is Foreign Direct Investment Good for Health in Low and Middle Income Countries? An Instrumental Variable Approach

TY - JOUR

T1 - Is Foreign Direct Investment Good for Health in Low and Middle Income Countries?

T2 - An Instrumental Variable Approach

AU - Burns, Darren

AU - Jones, AP

AU - Goryakin, Yevgeniy

AU - Suhrcke, Marc Eckart

N1 - © 2017 Elsevier Ltd. All rights reserved. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.

PY - 2017/5/1

Y1 - 2017/5/1

N2 - There is a scarcity of quantitative research into the effect of FDI on population health in low and middle income countries (LMICs). This paper investigates the relationship using annual panel data from 85 LMICs between 1974 and 2012. When controlling for time trends, country fixed effects, correlation between repeated observations, relevant covariates, and endogeneity via a novel instrumental variable approach, we find FDI to have a beneficial effect on overall health, proxied by life expectancy. When investigating age-specific mortality rates, we find a stronger beneficial effect of FDI on adult mortality, yet no association with either infant or child mortality. Notably, FDI effects on health remain undetected in all models which do not control for endogeneity. Exploring the effect of sector-specific FDI on health in LMICs, we provide preliminary evidence of a weak inverse association between secondary (i.e. manufacturing) sector FDI and overall life expectancy. Our results thus suggest that FDI has provided an overall benefit to population health in LMICs, particularly in adults, yet investments into the secondary sector could be harmful to health.

AB - There is a scarcity of quantitative research into the effect of FDI on population health in low and middle income countries (LMICs). This paper investigates the relationship using annual panel data from 85 LMICs between 1974 and 2012. When controlling for time trends, country fixed effects, correlation between repeated observations, relevant covariates, and endogeneity via a novel instrumental variable approach, we find FDI to have a beneficial effect on overall health, proxied by life expectancy. When investigating age-specific mortality rates, we find a stronger beneficial effect of FDI on adult mortality, yet no association with either infant or child mortality. Notably, FDI effects on health remain undetected in all models which do not control for endogeneity. Exploring the effect of sector-specific FDI on health in LMICs, we provide preliminary evidence of a weak inverse association between secondary (i.e. manufacturing) sector FDI and overall life expectancy. Our results thus suggest that FDI has provided an overall benefit to population health in LMICs, particularly in adults, yet investments into the secondary sector could be harmful to health.

KW - Development

KW - Foreign direct investment

KW - Instrumental variables

KW - Low and middle income countries

KW - Panel data regression

KW - Population health

UR - http://www.scopus.com/inward/record.url?scp=85016403450&partnerID=8YFLogxK

U2 - 10.1016/j.socscimed.2017.03.054

DO - 10.1016/j.socscimed.2017.03.054

M3 - Article

SN - 0277-9536

VL - 181

SP - 74

EP - 82

JO - Social science and medicine

JF - Social science and medicine

ER -