Funding health in developing countries: foreign aid, FDI, or personal remittances?

Abstract

PurposeThis paper presents three models of funding health care in 130 developing countries, based upon a public system, a private system and personal remittances.Design/methodology/approachThe authors trace the funding of health from foreign aid to health funding and health outcomes in the public system, foreign direct investment to health funding in the private system, and personal remittances to health outcomes. This is followed by panel data, fixed effects models subjected to 2-, 3- and 4-stage least squares regressions.FindingsFindings from the first model were that aid in the form of Technical Cooperation Grants funded Infrastructure. Infrastructure Spending due to aid funds Government Health Plans, which reduced the Incidence of Tuberculosis, which in turn reduced Undernourishment and increases Life Expectancy. Other positive health outcomes included reduced Birth Rate and reduced Maternal Mortality. In the second model, Foreign Direct Investment increased Female Employment and GDP per Person, funding Private Health Plans, which increase Life Expectancy, reduced Undernourishment, increased Skilled Care at Birth, increased the Number of Hospital Beds, reduced Maternal Mortality and increased the Birth Rate. In the third model, Remittances influenced both Out-of-Pocket Medical Expenses and Private Plans.Social implicationsPublicly funded programs may be directed to nutrition, increasing life expectancy. Private funding may be directed to improving maternal conditions, with remittances removing the liquidity constraints.Originality/valueThis paper is the first attempt to trace health funding from its sources of foreign aid, foreign direct investment and personal remittances using three separate paths.