Does Foreign Direct Investment Improve Healthcare Outcomes?

A Panel Data Analysis of Emerging Economies

Abstract

This paper asks whether foreign direct investment (FDI) improves 3healthcare outcomes in emerging economies. The question matters because many developing countries have opened their health and pharmaceutical sectors to foreign capital in the hope that investment will bring better facilities, technology, and healthier populations. The study builds a country-year panel of 38 emerging-market and developing economies observed from 2000 to 2023, drawing all variables from the World Bank World Development Indicators. Healthcare outcomes are measured by life expectancy at birth, infant mortality, under-five mortality, and maternal mortality. The main explanatory variable is FDI net inflows as a share of gross domestic product. The analysis controls for income, health spending, urbanisation, education, physician density, population, and trade openness and estimates a two-way fixed-effects panel model with country and year fixed effects. Post-estimation diagnostics detect heteroscedasticity, autocorrelation, and cross-sectional dependence, so the model is re-estimated with Driscoll-Kraay standard errors, which are robust to all three. The central finding is that FDI shows no statistically significant association with health outcomes at conventional levels. The result holds across an extensive robustness battery and survives the Driscoll-Kraay correction, under which FDI is significant only at the ten percent level. The paper reads this as weak evidence at most. It concludes that FDI, on its own, is not a reliable engine of better population health, and that this null result sits within a recognised pattern in the wider literature.