Advertisement

Social Indicators Research

, Volume 129, Issue 3, pp 1155–1170 | Cite as

Accounting for Contribution of Trade Openness and Foreign Direct Investment in Life Expectancy: The Long-Run and Short-Run Analysis in Pakistan

  • Md. Samsul Alam
  • Syed Ali Raza
  • Muhammad Shahbaz
  • Qaisar Abbas
Article

Abstract

This paper examines the impact of trade openness and foreign direct investment (FDI) on life expectancy using time series data over the period of 1972–2013. We have applied structural break unit root as well as cointegration tests to examine integrating properties of the variables and cointegration among the variables. The causal linkage between the variables has been tested by applying the VECM Granger causality. The empirical evidence confirms the presence of cointegration amid the variables. Moreover, trade openness and FDI increase population health measured by life expectancy in the long-run. Furthermore, the analysis suggests that trade openness and FDI cause life expectancy in the short-run. These findings have several policy implications to improve life expectancy for the people of Pakistan in particular and other developing countries in general.

Keywords

Trade openness Foreign direct investment Life expectancy Pakistan 

References

  1. Banerjee, A., Dolado, J., Galbraith, J. W., & Hendry, D. F. (1993). Co-integration, error correction, and the econometric analysis of non-stationary data. Oxford: Oxford University Press.CrossRefGoogle Scholar
  2. Bayer, C., & Hanck, C. (2013). Combining non-cointegration tests. Journal of Time Series Analysis, 34(1), 83–95.CrossRefGoogle Scholar
  3. Bergh, A., & Nilsson, T. (2010). Good for living? On the relationship between globalization and life expectancy. World Development, 38(9), 1191–1203.CrossRefGoogle Scholar
  4. Bezuneh, M., & Yiheyis, Z. (2014). Has trade liberalization improved food availability in developing countries? An empirical analysis. Journal of Economic Development, 39(1), 63–78.Google Scholar
  5. Bhargava, A. (1986). On the theory of testing for unit roots in observed time series. The Review of Economic Studies, 53(3), 369–384.CrossRefGoogle Scholar
  6. Blouin, C., Chopra, M., & van der Hoeven, R. (2009). Trade and social determinants of health. The Lancet, 373(9662), 502–507.CrossRefGoogle Scholar
  7. Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–135.CrossRefGoogle Scholar
  8. Brown, R. L., Durbin, J., & Evans, J. M. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society. Series B (Methodological), 37(2), 149–192.Google Scholar
  9. Bussmann, M. (2009). The effect of trade openness on women’s welfare and work life. World Development, 37(6), 1027–1038.CrossRefGoogle Scholar
  10. Ciruelos, A., & Wang, M. (2005). International technology diffusion: Effects of trade and FDI. Atlantic Economic Journal, 33(4), 437–449.CrossRefGoogle Scholar
  11. Clemente, J., Montanes, A., & Reyes, M. (1998). Testing for a unit root in variables with a double change in the mean. Economics Letters, 59(2), 175–182.CrossRefGoogle Scholar
  12. Deaton, A. (2004). Health in an age of globalization. Cambridge: National Bureau of Economic Research.CrossRefGoogle Scholar
  13. Dreher, A., & Gaston, N. (2008). Has globalization increased inequality? Review of International Economics, 16(3), 516–536.CrossRefGoogle Scholar
  14. Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 55(2), 251–276.CrossRefGoogle Scholar
  15. Harrison, A. (1996). Openness and growth: A time-series, cross-country analysis for developing countries. Journal of Development Economics, 48(2), 419–447.CrossRefGoogle Scholar
  16. Haug, A. A. (2002). Temporal aggregation and the power of cointegration tests: A Monte Carlo Study. Oxford Bulletin of Economics and Statistics, 64(4), 399–412.CrossRefGoogle Scholar
  17. Hawkes, C. (2005). The role of foreign direct investment in the nutrition transition. Public Health Nutrition, 8(04), 357–365.CrossRefGoogle Scholar
  18. Hawkes, C. (2007). Globalization, Food and Nutrition Transitions. Geneva, Switzerland: Institution of Population Health, WHO Commission on Social Determinants of Health.Google Scholar
  19. Herzer, D. (2015). The long-run effect of trade on life expectancy in the United States: An empirical note. Applied Economics Letters, 22(5), 416–420.CrossRefGoogle Scholar
  20. Herzer, D., & Nunnenkamp, P. (2012). FDI and health in developed economies: A panel cointegration analysis. Institute for the World Economy: Kiel.Google Scholar
  21. Kawachi, I., & Wamala, S. (2006). Globalization and health. Oxford: Oxford University Press.CrossRefGoogle Scholar
  22. Levine, D. I., & Rothman, D. (2006). Does trade affect child health? Journal of Health Economics, 25(3), 538–554.CrossRefGoogle Scholar
  23. Lin, F., Sim, N. C. S, & Pham, N. (2015). Child Mortality in the LDCs: The role of trade, institutions and environmental quality. Working paper no. 2015-15. School of Economics, The University of Adelaide, Australia.Google Scholar
  24. Ministry of Finance. (2014). Government of Pakistan. Islamabad, Pakistan.Google Scholar
  25. Narayan, P. K. (2005). The saving and investment nexus for China: Evidence from cointegration tests. Applied Economics, 37(17), 1979–1990.CrossRefGoogle Scholar
  26. Ng, S., & Perron, P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica,69(6), 1519–1554.CrossRefGoogle Scholar
  27. Outreville, J. F. (2007). Foreign direct investment in the health care sector and most-favoured locations in developing countries. The European Journal of Health Economics, 8(4), 305–312.CrossRefGoogle Scholar
  28. Ovaska, T., & Takashima, R. (2006). Economic policy and the level of self-perceived well-being: An international comparison. The Journal of Socio-Economics, 35(2), 308–325.CrossRefGoogle Scholar
  29. Owen, A. L., & Wu, S. (2007). Is trade good for your health? Review of International Economics, 15(4), 660–682.CrossRefGoogle Scholar
  30. Papageorgiou, C., Savvides, A., & Zachariadis, M. (2007). International medical technology diffusion. Journal of International Economics, 72(2), 409–427.CrossRefGoogle Scholar
  31. Pesaran, M. H., & Pesaran, B. (1997). Working with Microfit 4.0: interactive econometric analysis;[Windows version]. Oxford: Oxford University Press.Google Scholar
  32. Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621–634.CrossRefGoogle Scholar
  33. Pesaran, M. H., Shin, Y., & Smith, R. J. (2000). Structural analysis of vector error correction models with exogenous I (1) variables. Journal of Econometrics, 97(2), 293–343.CrossRefGoogle Scholar
  34. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.CrossRefGoogle Scholar
  35. Pritchett, L., & Summers, L. H. (1996). Wealthier is healthier. Journal of Human Resources, 31(4), 841–868.CrossRefGoogle Scholar
  36. Rodrik, D., Subramanian, A., & Trebli, F. (2002). Institutional rule: The primacy of institutions over geography and integration in economic development. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  37. Romer, P. (1989). Endogenous technological change. Working paper no. 3210, National Bureau of Economic Research.Google Scholar
  38. Shahbaz, M., Loganathan, N., Mujahid, N., Ali, A., & Nawaz, A. (2015). Determinants of Life expectancy and its prospects under the role of economic misery: A case of Pakistan. Social Indicators Research, 1–18.Google Scholar
  39. Stark, O. (2004). Rethinking the brain drain. World Development, 32(1), 15–22.CrossRefGoogle Scholar
  40. Stevens, P., Urbach, J., & Wills, G. (2013). Healthy trade: The relationship between open trade and health. Foreign Trade Review, 48(1), 125–135.CrossRefGoogle Scholar
  41. Stroup, M. D. (2007). Economic freedom, democracy, and the quality of life. World Development, 35(1), 52–66.CrossRefGoogle Scholar
  42. Tiwari, A. K., Shahbaz, M., & Islam, F. (2013). Does financial development increase rural-urban income inequality? Cointegration analysis in the case of Indian economy. International Journal of Social Economics, 40(2), 151–168.CrossRefGoogle Scholar
  43. Tomiura, E. (2007). Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level. Journal of International Economics, 72(1), 113–127.CrossRefGoogle Scholar
  44. Wei, S-J, & Wu, Y. (2002). The life-and-death implications of globalization. IMF Working PaperGoogle Scholar
  45. World Bank. (2015). World development indicators. Washington, DC.Google Scholar
  46. WDI. (2014). World development indicators. Washington, DC: World Bank.Google Scholar
  47. Xu, B., & Wang, J. (2000). Trade, FDI, and international technology diffusion. Journal of Economic Integration, 15(4), 585–601.CrossRefGoogle Scholar
  48. Yanikkaya, H. (2003). Trade openness and economic growth: A cross-country empirical investigation. Journal of Development Economics, 72(1), 57–89.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • Md. Samsul Alam
    • 1
  • Syed Ali Raza
    • 2
  • Muhammad Shahbaz
    • 3
  • Qaisar Abbas
    • 3
  1. 1.Department of Accounting, Finance and EconomicsGriffith UniversityBrisbaneAustralia
  2. 2.IQRA UniversityKarachiPakistan
  3. 3.Department of Management SciencesCOMSATS Institute of Information TechnologyLahorePakistan

Personalised recommendations