title: Is foreign direct investment good for health in low and middle income countries? An instrumental variable approach.
abstract: 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.
authors.affiliation: Health Economics Group, Norwich Medical School, University of East Anglia, Norwich, NR47TJ, UK. Electronic address: DBurns@bresmed.com.
authors.forename: Darren K
authors.initials: DK
authors.lastname: Burns
authors.affiliation: Norwich Medical School, University of East Anglia, Norwich, NR47TJ, UK.
authors.forename: Andrew P
authors.initials: AP
authors.lastname: Jones
authors.affiliation: Organisation for Economic Co-operation and Development, Paris, France.
authors.forename: Yevgeniy
authors.initials: Y
authors.lastname: Goryakin
authors.affiliation: Health Economics Group, Norwich Medical School, University of East Anglia, Norwich, NR47TJ, UK; Centre for Health Economics, University of York, Heslington, York, YO105DD, UK.
authors.forename: Marc
authors.initials: M
authors.lastname: Suhrcke
mesh_terms: D003906:Developing Countries / Q000706:statistics & numerical data*; D054242:Emigrants and Immigrants / Q000706:statistics & numerical data*; D059066:Gross Domestic Product / Q000706:statistics & numerical data; D061889:Healthcare Financing; D006801:Humans; D007449:Investments / Q000592:standards* / Q000706:statistics & numerical data; D008017:Life Expectancy / Q000639:trends; D019984:Quality Indicators, Health Care / Q000191:economics* / Q000706:statistics & numerical data; D012044:Regression Analysis; D014480:United Nations / Q000706:statistics & numerical data
keywords: Development; Foreign direct investment; Instrumental variables; Low and middle income countries; Panel data regression; Population health