Economic Growth, Health and Foreign Direct Investment: An Empirical Investigation for Turkey

Abstract

This study aims to investigate the effect of foreign direct investment (FDI) on health for the period of 1975-2018 in Turkey by utilizing a health production function approach. Life expectancy at birth which is the dependent variable in the study is used as a proxy for the average health status of Turkish citizens. FDI is defined as the ratio of foreign direct investment to GDP. The other independent variables are (1) the real GDP per capita aimed to represent country's average standards of living and (2) the number of students per teacher at tertiary education which is used to proxy the education quality. Other factors expected to affect the life expectancy in the study include (1) the trade openness (ratio of the sum of exports and imports to GDP) which measures the openness of a country to international trade and (2) the health expenditures per capita to reflect the level of health spending in the country. The Fully Modified OLS (FMOLS) by Phillips and Hansen (1990) to provide optimal estimates of cointegrating relationship is preferred as the estimation method since it allows for endogeneity of explanatory variables. Moreover, the estimation analysis is also enriched by the results of Canonical Cointegrating Regression (CCR) and Stock-Watson Dynamic OLS (DOLS) regressions. The findings of the study point out that foreign direct investment inflows reduce life expectancy in Turkey. Moreover, the results demonstrate that in order to increase life expectancy by one month in Turkey, the FDI / GDP ratio is required to decrease by 31%, the real GDP per capita to increase by 2.41%, the number of students per teacher to decrease by 8.2%, health expenditure per capita to increase by 1.76% and the trade / GDP ratio to increase by 4.7%.