International Trade: Elixir Or Venom For Health?

Abstract

The impact of globalization, especially economic globalization, on human development of underdeveloped countries has been a widely debated topic. There are two contrarian views: modernization view that sees globalization as a driver of socioeconomic growth through the rise of income and dependence view that sees globalization as a process of developing the developed at the cost of underdeveloped. Similar arguments prevail in the literature about the impact of globalization and trade on health. Economists believe that globalization and trade would result in higher economic growth, but they are sceptical of it resulting in better health outcomes due to inequality attached with globalization and international trade. This inequality in garnering benefits may hinder the health improvements, especially for the underdeveloped countries. This study is an attempt to interlink two strands of literature: impact of globalization and trade on economic growth and higher income's impact on the health status. The dissertation proposes to assess the impact of globalization and international trade on the health status of countries empirically. It further attempts to analyze which dimension of the globalization process has maximum impact on health status. It also attempts to dissect the impact of international trade on health in impact from exports and imports; and impact of trade-in-services and impact of trade-in-goods. Further to these, the impact of globalization and trade is checked across countries grouped as per their initial levels of human development, income, and industrial development. To further narrow the focus of the study, the study analyses the impact of trade in health consumables and pharmaceuticals on the health status. For the purpose of analysis, the study uses data from around 160 countries from 1995 to 2011. The empirical exercise uses fixed effects panel data methodology. The first part of the study is an attempt to understand the impact of globalization on the health indicators. The analysis shows that globalization has a positive impact on the health. This result holds true even when income inequality is explicitly considered and controlled for in a cross-sectional analysis. The result gets further strengthened as regional analysis also shows a similar trend. One of the important findings is that for health improvements, the economic dimension of the globalization is more important than its social and political dimension. And as the country moves up the ladder of development, political and social dimensions become important respectively. The second part focus on international trade- a major component of the economic dimension of the globalization. The empirical exercise shows results consistent with the results of the importance of economic globalization for health improvements. The result also holds when income inequality is controlled for in a cross-sectional analysis. When further divided, the study finds both imports and exports to have positive impact on the health status but both do not have statistically different impacts. Whereas, trade-in-services seems to have a statistically significant higher impact on the health indicators than trade-in-goods. Low income or low developed countries seem to have benefitted in terms of health from globalization and trade. This is contrary to the argument of these countries being left out from the beneficial process of globalization. The last part checks the direct impact of trade in health consumables and pharmaceuticals on the health indicators. The trade in health consumables, be it overall, exports or imports, has a positive impact on the health status. Whereas, trade in pharmaceuticals does not show any statistically significant impact on the health. It is imports of pharmaceuticals that has no or undesirable direction of the impact on health. Exports seem to have a beneficial impact. On further exploration, while controlling for initial health status, countries with high or low health status seem to have benefitted from imports from the import of pharmaceuticals. Whereas, countries with the medium level of health status, seem to have no impact on health indicators statistically. The study demonstrates to the policy makers of the benefits a country may derive from the ever expanding process of globalization. Especially for low developed countries, economic globalization is the major force behind development process. However, it is also to be noted that one size fits all approach of multilateral organizations will not work because development and income status of a country plays an important role in deciding the rate of benefits derived from globalization and international trade. The income inequality does not impede the health benefits derived from globalization and trade. The most important dimension of globalization and desired focus on trade-in-services or trade-in-goods are dependent on the level of development or income of a country. These insights from the study are expected to help national governments to devise domestic policies and multilateral agencies to prescribe policies so that a country would get maximum possible benefits from the globalization and international trade.