Diverse exports improve a country’s health outcomes

January 25, 2021

Normalization of trade helps heal the gender gap, but at a cost. (AP Photo/Stephen B. Morton)

The complexity of a country’s economy and the mix of goods a nation produces can have a positive influence on its population’s health, according to recent research.

The analysis, published in the November edition of Social Science & Medicine, found “strong and robust evidence” that countries that export sophisticated and high-end products such as machinery, chemicals and metal on average enjoy better health outcomes than countries with economies based mainly on unsophisticated products such as raw materials, wood and textiles.

The research was conducted by Trung Vu, a Ph.D. candidate in economics at the University of Otago.

“There are many studies exploring the relationship between trade openness — the overall volume of exports and imports as a proportion of GDP — and health outcomes,” Vu said. “Surprisingly, there exists no evidence on the quality of what a country exports and its health status.”

Previous studies, Vu said, have studied the role that economic complexity has on gross domestic product or income inequality levels, but he is among the first to explicitly analyze the relationship between economic complexity and health outcomes.

“Economic development is a multi-dimensional concept,” Vu said. “An explicit focus on income levels arguably constrains our understanding of substantial differences in economic prosperity across the globe.”

Using an economic complexity index for 103 countries between 1970 and 2015, Vu compared a country’s economy to different measures of population health from the World Bank’s World Development Indicators, including infant, under age 5 and neonatal mortality rates as well as life expectancy at birth.

The economic complexity index was developed in 2009 by Cesar Hidalgo and Ricardo Hausmann and is based at the Massachusetts Institute of Technology’s Observatory of Economic Complexity. The index, constructed using international trade data from the United Nations Comtrade database, allows for an internationally comparable measure of countries’ economic structures. 

Complex economies are characterized by their ability to produce and export a range of sophisticated products because of their human capital, physical capital and institutions.

“Additionally, specializing in high value-added goods arguably sustains wages and profits over a prolonged period of time, potentially leading to a higher income per capita,” he said.

According to Vu’s findings, economic complexity helps lower infant, under-5 and neonatal mortality rates and improve life expectancy at birth. The main driver of this, Vu said, is the employment opportunities created by a complex economy, as well as the income per capita, urban population and lowered income inequality caused by economic complexity.

Complex economies, he added, are also less vulnerable to individual external shocks, which could also lead to improved health outcomes.

It follows then, Vu wrote, that health improvements can be fostered through structural changes and investments toward producing a wider range of sophisticated products to export, though moving from unsophisticated to complex production and diversifying exports may prove difficult for poorer countries because of how tightly related sophisticated production processes can be.

Sophisticated products “are located at the center of the product space with high degrees of connectedness with many other products,” Vu wrote. “By contrast, simple … products are located at the periphery of the product space with lack of relatedness with other products.”

Vu said he was motivated to research the relationship between economic complexity and health outcomes because of how it may impact public health policies, particularly for developing countries. Additionally, he said, the extent to which exports affect a country’s population health “remains largely unexplored in previous studies.”

Future research, Vu said, may explore specific channels through which economic complexity can lead to health improvements. This, he said, could arguably improve the understanding between economic complexity and overall national health.

“Poor health remains an enduring feature of many societies in the developing world,” Vu said. “Hence, the exploration of the determinants of health improvements plays an important role in formulating public health policies.”

The study “Economic complexity and health outcomes: A global perspective,” published in the November edition of Social Science & Medicine, was authored by Trung Vu, University of Otago.

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