Can Economic Openness Improve the Health Status of Bangladesh Economy: An Empirical Analysis

Abstract

Economic openness especially in developing countries like Bangladesh greatly contributes to an increase in the country’s welfare through the increase in standards of living, education, as well as health status. Through globalization, the positive effects of health is prominent as access to health technologies are readily made available which can go a long way to increase life expectancy as well as reduce infant mortality rates. This research paper empirically examines the cointegration and causal relationship between economic openness and health status of Bangladesh economy by using annual data from 1980 to 2014. As the economy becomes more open, investments in health sector also increases which facilitate improvements in health. To further explore this relationship, Augmented Dickey Fuller (ADF) test has been used to check if the variables are stationary. The Johansen cointegration method has also been used in order to check the robustness of the relationship among the variables. Vector Error Correction Model (VECM) has been estimated in order to determine the short-run dynamics of this behavior followed by the Granger causality test. The results reveal that long-run bidirectional causality runs from economic openness to health and vice versa, which provides support that rise in economic openness is both a cause and a consequence of increased health status of Bangladesh.