Infectious Diseases, Trade, and Economic Growth: a Panel Analysis of Developed and Developing Countries

Abstract

The purpose of this paper is to examine the effect of infectious diseases on trade and economic growth in 88 countries (44 developed countries and 44 developing countries). Annual panel data from 1996 to 2018 are examined using the Pedroni panel cointegration test in order to check the existence of a long-run relationship; FMOLS, DOLS, and the VECM techniques to detect the causality direction. The following findings are established. First, in the long run, infectious diseases are more destructive on economic growth in developing countries than in developed countries. Second, infectious diseases have a negative and significant influence on the trade openness, but more intensively in developed countries than in developing countries. Finally, using the VEC model, our results demonstrate that the short run causality between diseases, economic growth, and trade openness is unidirectional running from infectious diseases to trade and economic growth. However, in the long run, there is bidirectional Granger causality among the running variables. Based on these results, government makers should concentrate more on the healthcare delivery in order to realize higher rates of economic growth and trade.