Can Economic Openness Improve Health? An Empirical Study on the Relationsip between Economic Liberalization and Infant Mortality

Sammanfattning: Since the Washington consensus in the 1980s, economic liberalization has been seen as a panacea for increasing the economic development and the welfare of a developing country. By reducing trade tariffs and barriers, moving from a socialistic economic system and removing state monopoly on major exports, it is believed that a developing country will increase its income and economic growth while benefiting from various positive globalization factors such as new technologies and knowledge. This will, in turn, benefit the general population by improving living standards and thus also individual health. Most empirical literature on the effect of economic liberalization on health studies the relationship on a macro level. This study contributes to the existing literature by using micro-level data. By combining data on more than 160,000 women from 30 sub-Saharan African countries and their 500,000 births, using Demographic Health Surveys (DHS), with Wacziarg and Horn-Welch’s data on country-specific timing of economic liberalization, this study investigates if economic liberalization effects child and neonatal mortality. Both an OLS model controlling for country effect and a mother fixed effect model is used for estimation. Although results from previous empirical studies on macro level show that economic openness has a positive effect on health, it is not possible from this study to draw any conclusions about the causality of this relationship. This holds also when conducting sub-sample analyses on different socio-economic groups. The results suggest that there exists unobserved heterogeneity on country and mother level that confounds this correlation. More research, in particular on individual level, is thus needed in order to fully understand how economic liberalization may affect health.