Do Foreign Aid and Globalization Affect Health in Developing Countries?

Health plays a crucial role for human development. Therefore, foreign aid is often directed to combat ill-health in the developing world. At the same time, globalization is a strong force that may aect health through various channels. But the two factors may also be interrelated. In this paper, I analyze the relationship between foreign aid, globalization, and health by estimating a xed eects panel data model over 93 aid recipient countries between 1970 and 2009. As an important extension to previous studies, I include an interaction term of the two variables that turns out to be highly signicant. In addition, I investigate what the relationship looks like for three dierent dimensions of globalization (economic, social, and political). The correlation between aid and health is negative at high levels of overall globalization. Overall globalization is positive for health at low levels of aid. The relationship is similar when looking at economic and social globalization. For the social dimension, though, lower levels of globalization generates a positive correlation between aid and health and high levels of aid leads to a negative relationship between social globalization and health. Political globalization is positively related to health at all levels of aid, but the interaction eect is insignicant. A battery of sensitivity analyses suggests that the results are fairly stable toward specication and sample alterations