Policy and Practice

Theme Papers
Is globalization good for your health?
David Dollar1

Abstract Four points are made about globalization and health. First, economic integration is a powerful force for
raising the incomes of poor countries. In the past 20 years several large developing countries have opened up to
trade and investment, and they are growing well — faster than the rich countries. Second, there is no tendency for
income inequality to increase in countries that open up. The higher growth that accompanies globalization in
developing countries generally benefits poor people. Since there is a large literature linking income of the poor to
health status, we can be reasonably confident that globalization has indirect positive effects on nutrition, infant
mortality and other health issues related to income. Third, economic integration can obviously have adverse health
effects as well: the transmission of AIDS through migration and travel is a dramatic recent example. However, both
relatively closed and relatively open developing countries have severe AIDS problems. The practical solution lies in
health policies, not in policies on economic integration. Likewise, free trade in tobacco will lead to increased
smoking unless health-motivated disincentives are put in place. Global integration requires supporting institutions
and policies. Fourth, the international architecture can be improved so that it is more beneficial to poor countries.
For example, with regard to intellectual property rights, it may be practical for pharmaceutical innovators to choose
to have intellectual property rights in either rich country markets or poor country ones, but not both. In this way
incentives could be strong for research on diseases in both rich and poor countries.

Keywords Commerce; International cooperation; Income; Economic development; Public health; Risk factors;
Health policy; Acquired immunodeficiency syndrome/transmission/prevention and control; Pharmaceutical
preparations/supply and distribution; Patents; Developing countries (source: MeSH ).
Mots clés Commerce; Coopération internationale; Revenu; Développement économique; Santé publique; Facteur
risque; Politique sanitaire; SIDA/transmission/prévention et contrôle; Préparations pharmaceutiques/ressources et
distribution; Brevet; Pays en développement (source: INSERM ).
Palabras clave Comercio; Cooperación internacional; Renta; Desarrollo económico; Salud pública; Factores de
riesgo; Polı́tica de salud; Sı́ndrome de inmunodeficiencia adquirida/transmisión/prevención y control;
Preparaciones farmacéuticas/provisión y distribución; Patentes; Paı́ses en desarrollo (fuente: BIREME ).
Bulletin of the World Health Organization, 2001, 79: 827–833.

Voir page 832 le résumé en français. En la página 832 figura un resumen en español.

Introduction one concerns health. This is obviously a huge topic,

and my objective here is the modest one of injecting
Global economic integration has been going on for a four points into the debate about globalization and
long time, but its pace has accelerated in the past health. I am going to deal with globalization in the
decade. Trade and foreign asset ownership have hit sense of increased integration of different economies
new highs relative to world income. International and societies as a result of greater flows of goods,
travel is at unprecedented levels, while the Internet capital, people, and ideas.
has facilitated low-cost communication around the
globe. This integration has obvious economic
benefits for the world as a whole, but it has also
given rise to a wide range of anxieties; an important
Global integration and the income
of poor countries
1
Development Research Group, The World Bank, 1818 H Street NW, I start with the relationship between globalization and
Washington, DC 20433, USA (email: www.worldbank.org/research/
growth). The views expressed are those of the author and do not the income of the poor because firstly the issue is
necessarily reflect official views of the World Bank or its member widely misunderstood in current debates about
countries. globalization, and secondly it is well established that
Ref. No. 01-1316 there is a link between income of the poor and some

Bulletin of the World Health Organization, 2001, 79 (9) # World Health Organization 2001 827
Special Theme – Globalization

important health outcomes. Rising income of the retain about each individual study threaten to block
poor leads to better nutrition, lower child mortality, our view of the overall forest of evidence. Even
better maternal health, and also to better female though no one study can establish that openness to
education, which contributes further to these health trade has unambiguously helped the representative
outcomes (1, 2). Thus, one important link from Third World economy, the preponderance of
globalization to health is through income. evidence supports this conclusion’’. They go on to
That openness to international trade and note the ‘‘empty set’’ of countries that chose to be
investment accelerates the development of poor less open to trade and factor flows in the 1990s than
countries is one of the most widely held beliefs in the in the 1960s and rose in the global living-standard
economics profession. There is considerable evi- ranks at the same time. ‘‘As far as we can tell,’’ they
dence to support this idea. Srinivasan & Bhagwati conclude, ‘‘there are no anti-global victories to
argue that the best evidence in support of the report for the postwar Third World. We infer that
openness–growth link is that ‘‘nuanced, in-depth this is because freer trade stimulates growth in Third
analyses of country experiences in major OECD, World economies today, regardless of its effects
NBER and IBRD projects during the 1960s and before 1940’’ (11).
1970s have shown plausibly, and taking into account A visual way to document the correlation
numerous country-specific factors, that trade does between increased trade and faster growth is to
seem to create, even sustain, higher growth’’ (3). They compare the top one-third of developing countries in
note that cross-country growth regressions also terms of increases in the ratio of trade to GDP over
contain useful information on the openness–growth the past 20 years, with the rest of the developing
link, but they need to be interpreted carefully. world. This group of post-1980 globalizers has
The recent wave of globalization provides experienced a particularly large increase in trade
some important cases. The largest developing relative to income: 104%, compared to 71% for the
country, China, had an extremely closed economy rich countries. What is striking is that the remaining
until the end of the mid-1970s. While China’s initial two-thirds of developing countries actually trade less
economic reform focused on agriculture, since the today than they did 20 years ago (Fig. 1). The
1980s opening up to foreign trade and investment has globalizing group has also cut import tariffs sig-
been a key part of its strategy: nificantly — 34 points on average — compared with
11 points for the non-globalizers. The list of post-
Though it was not done without controversy, 1980 globalizers includes some well-known refor-
the argument that opening of the economy to mers (Argentina, China, Hungary, India, Malaysia,
foreign trade was necessary to obtain new Mexico, the Philippines and Thailand). The recent
capital equipment and new technology was globalizers have experienced an acceleration in their
made official policy. ... The expansion of growth rates, decade by decade, from 1.4% per year
China’s participation in international trade in the 1960s to 5.0% in the 1990s (Fig. 2), while
since the beginning of the reform movement growth rates in rich countries have slowed down over
in 1978, has been one of the most remarkable this period. By contrast, developing countries not in
features of its remarkable transformation (4). the ‘‘globalizing’’ group have experienced a decline in
their average growth rate from 3.3% per year in the
This opening up has led to unprecedented growth 1970s to 0.8% in the 1980s and 1.4% in the 1990s.
rates in the country’s coastal provinces, and higher, Alternatively, if one were to consider the top
though less spectacular, growth in interior locations. developing countries in terms of increased direct
India, too, has liberalized foreign trade and invest- foreign investment, the group of countries would be
ment in the 1990s and has obtained good results, with virtually the same. As with trade, there is evidence
growth of per capita income accelerating to above 4% that direct foreign investment accelerates the growth
(5). Among the very low-income countries, Uganda of the recipient country (9). Taken together, the
and Viet Nam are the best examples of countries that evidence is supportive of models in which innovation
have increased their participation in trade and plays a key role in growth, and integration with the
investment, and both have grown well in the 1990s. global economy accelerates innovation in developing
These cases indicate that openness to foreign countries.
trade and investment, coupled with complementary While migration is the most restricted of global
reforms, can lead to faster growth in developing flows, I would also like to say a word about its role in
countries. The experiences of China, India, and Viet poverty reduction. Hatton & Williamson estimate
Nam are not isolated examples. Across countries, the effect of out-migration on wages in African
growth is highly correlated with measures of trade countries with the intuitive result that out-migration
openness, trade volumes and amounts of direct of unskilled workers raises wages for those who
foreign investment (6–9). Both Srinivasan & remain behind (not to mention the return flow of
Bhagwati and Rodriguez & Rodrik warn us to be remittances, which is very significant for some
careful about drawing conclusions from cross- countries) (12).
country correlations (3, 10). Still, I agree with the Thus, there is evidence that trade, direct
assessment of the economic historians Peter Lindert foreign investment and out-migration can all increase
& Jeff Williamson that: ‘‘The doubts that one can incomes in developing countries.

828 Bulletin of the World Health Organization, 2001, 79 (9)

 Is globalization good for your health?

Global integration and the income

of poor people
One commonly held view of growing international
economic integration is that it leads to growing
inequality between rich and poor countries, as well as
within the same countries, benefiting richer house-
holds more than poorer ones. For example, accord-
ing to Jay Mazur, ‘‘Globalization has dramatically
increased inequality between and within nations’’
(13). The previous section showed how greater
openness to international trade has, in fact, con-
tributed to narrowing the gap between rich and poor
countries as the globalizers, as a group, have grown
faster than the rich countries as a group. But what
about the effects of globalization on inequality within
countries?
In order to examine this issue, Dollar & Kraay
put together a large data set on income inequality,
compiled from a variety of existing sources (primarily
the data set constructed by Deininger & Squire with
several updates using more recently available data)
(14, 15). Dollar & Kraay use these data, covering 137
countries, to try to understand what is happening to
the income of the bottom 20% of the income
distribution, as globalization proceeds. There is on
average a one-to-one relationship between the
growth rate of income of the poor and the growth
rate of per capita income, but also quite a lot of
variation around that average relationship (Fig. 3). In
other words, percentage changes in incomes of the
poor, on average, are equal to percentage changes in
average incomes. These results are equivalent to the
finding that changes in the distribution of income are
not systematically associated with the growth rate.
How can we explain deviations around the one-
to-one relationship, which reflect changes in inequal-
ity? The hypothesis that greater trade openness leads
to growing household inequality is the hypothesis
that growing openness leads to points ‘‘below the
line’’ in Fig. 3: growth of income of the poor less than
proportionate to per capita GDP growth. Dollar &
Kraay considered a variety of possible variables that
might explain cross-country differences in the extent
to which growth accrues to those in the bottom
quintile, with little success. One of the variables
considered was trade volumes, where they found no
evidence whatsoever of a systematic relationship
between changes in trade and changes in inequality.
Fig. 4 shows the relationship between changes in
trade to GDP and changes in the Gini measure of
inequality, not controlling for other variables. Dollar
& Kraay show that the non-relationship is quite
robust when many other variables are added to the
analysis. No doubt trade and investment liberal-
ization has distributional consequences, that is, there
are ‘‘winners’’ and ‘‘losers’’ in the short run. However,
their finding is that the losers do not come
disproportionately from among the poor. While such
a finding is heartening, nevertheless, it has to be a
concern that some poor households are hurt in the
short run by trade liberalization. Thus, it is important

Bulletin of the World Health Organization, 2001, 79 (9) 829

Special Theme – Globalization

share of children stunted through malnutrition in

Viet Nam declined from 51% to 34% (16)!

Adverse health effects of globalization

To the extent that global integration helps reduce
poverty, it will indirectly lead to health improvements
through income. But clearly globalization can have
adverse effects on health as well. The adverse effects
originate most clearly as side-effects of travel and
migration, though trade in food and other products
can spread disease as well.
The AIDS epidemic is the most dramatic
example in recent times of a deadly disease spread
through travel and migration. Obviously, if there is an
AIDS-free community somewhere on earth that can
completely cut itself off from contact with any other
humans, it can be reasonably certain that it will be
spared this health disaster. It will clearly pay a high
price for this isolation in terms of poverty and quality
to complement open trade policies with effective of life. The Democratic People’s Republic of Korea
social protection measures, such as unemployment probably comes closest to achieving this kind of
insurance and food-for-work schemes. isolation. Almost all other societies choose to have
The fact that increased trade generally goes some interaction — trade, travel, investment — with
hand-in-hand with more rapid growth and no the world, all or any of which will increase the spread
systematic change in household income distribution of disease. In the case of AIDS, for example, Over
means that increased trade generally goes hand in finds a positive relationship between the presence of
hand with improvements in well-being of the poor. immigrants in the population and the HIV prevalence
Looking at individual ‘‘globalizers’’, some have rate (17). The issue of integration is not just
experienced increases in inequality. China is a notable international. As China has reformed and there has
example, where the increase in inequality was quite been more economic integration (including migra-
large. Still, income of the poor has grown rapidly, and tion) within the country, sexually transmitted diseases
China has had the most rapid reduction in poverty in that were nearly eliminated in the 1960s have spread
world history: rural poverty declined from 250 mil- rapidly (18).
lion people in 1978 to 34 million in 1999. In other So, integration clearly exposes communities to
globalizing developing countries there has been various health risks. The point that I want to make
virtually no change in household inequality (Uganda, here is that — leaving aside extreme cases such as the
Viet Nam) or even modest declines in inequality Democratic People’s Republic of Korea — both
(Malaysia, the Philippines). weak globalizers and strong globalizers in the
Viet Nam nicely illustrates my main point developing world face these health risks. Countries
about global integration and poverty. As Viet Nam that are relatively closed to trade and investment,
has opened up, it has had a large increase in per capita such as Burma and Zimbabwe, nevertheless have
income and no significant change in inequality. Thus, severe AIDS problems. In fact, the relatively closed
income of the poor has risen dramatically, and the developing countries tend to have a lot of out-
level of absolute poverty has dropped sharply, from migration because they have poor environments for
75% of the population in 1988 to 37% in 1998 investment and production. As their labour force
(Fig. 5). Poverty was cut in half in 10 years! In the flows in and out, these societies are highly exposed to
case of Viet Nam we have particularly good data international transmission of disease.
because a representative household survey was This evidence suggests to me that the sensible
conducted early on in the reform process (1992– approach to controlling AIDS is not to isolate the
93) and the same 5000 households were visited again economy from the rest of the world, but rather to
six years later. Of the poorest 5% of households in address the issue directly through health policies.
1992, 98% had higher income six years later. Since Thailand is a good example of a highly open economy
Viet Nam’s opening has resulted in exports of rice that is getting its AIDS problem under control. The
(produced by most of the poor farmers) and labour- World Bank report, Confronting AIDS, recommends
intensive products such as footwear, it should be no an approach combining public education with
surprise that the vast majority of poor households targeted interventions (such as condom distribution),
benefited immediately from a more open trading focused on high-risk groups such as sex workers and
system. And the benefits go beyond income to health drug users (18). This, in fact, is the approach that has
status as well. Between 1992 and 1998 the percentage proved effective in Thailand.

830 Bulletin of the World Health Organization, 2001, 79 (9)

 Is globalization good for your health?

Another good example of potential negative

health effects of globalization is trade in tobacco
products. Tobacco products are made very efficiently
in a number of countries, such as the United States.
For other countries, freer trade leads to lower prices
of tobacco products, more smoking, and more
tobacco-related illness (19). Again, the obvious
solution is health policy, not trade policy. There is
nothing in the international trade regime that
prevents a country from banning smoking or taxing
it very steeply, provided it taxes both imports and
domestic tobacco products, which would be the
sensible health policy.
The general point here is that openness
conveys economic benefits, but also exposes socie-
ties to various risks. Hence open policies need to be
complemented with good health policies.

Globalization and life-saving drugs

While there are reasons for believing that greater The main thing I want to do in this section is
trade and integration of markets will produce net highlight an interesting critique by Jean Lanjouw of
benefits of poverty reduction and improvements in the IPRs regime for pharmaceuticals (20). I am not
global health, a separate issue is whether existing sure if her proposal is politically viable, but it nicely
global institutions are adequate in terms of ensuring illustrates the complexity of the IPRs issue and the
that the health care needs of the poorest people shallowness of extreme views on either side of the
and the poorest countries are addressed. A case in debate (defend IPRs everywhere and always, or
point is the need for better and cheaper drugs for eliminate such rights completely).
health problems in developing countries. One of Lanjouw’s proposal is that for drugs which
the hot-button issues in the globalization debate combat global diseases, pharmaceutical innovators
concerns intellectual property rights (IPRs), espe- can choose to have IPRs in either rich country
cially with regard to pharmaceuticals. The con- markets or poor country markets, but not in both. So,
troversy over AIDS drugs for developing countries in the case of the AIDS drugs, such a system would
epitomizes what is both good and bad about bring us to exactly where we have ended up: the
globalization. pharmaceutical companies carried out their research
Innovation is spurred by the combination of a and development primarily with rich country markets
large market and IPRs that ensure that innovations in mind and they will earn their return from those
are rewarded. As the global economy has become markets. Poor countries in Africa will have access to
more integrated, the pace of technological advance these technologies free of charge. This is a very minor
has accelerated. The development of the highly disincentive to innovation because most of the
active antiretroviral therapy (HAART) which slows potential profits are in OECD markets. But that is
the onset of AIDS in HIV patients is a good not true for all potential health innovations. Even if a
example of this productivity. In wealthy countries, disease is global, it may have a concentration in
the price of this treatment is more than US$ 10 000 developing countries (a particular form of cancer, for
per year. I do not want to discuss, here, whether or example). Where there is little demand in OECD
not the specific price is ‘‘fair’’ in rich countries. The markets for an innovation, IPRs in developing
OECD system of innovation is based on public countries can be an important incentive for firms
funding of basic science and private funding of (based anywhere) to research and develop products
commercially viable research. This system, which to deal with the problem.
has been phenomenally productive, depends on a Lanjouw’s regime illustrates that IPRs are
framework of IPRs that allows a return well above important in stimulating innovation and that it is in
manufacturing costs so that innovators get re- the interests of developing countries to protect rights
warded for their investment in ideas. that will lead to more innovation in response to their
At the same time, it strikes almost everyone as problems. On the other hand, developing countries
immoral that people in the developing world infected will gain nothing by protecting IPRs on treatments
with HIV cannot get access to these drugs whose for AIDS or cancers that are common in rich
manufacturing cost is only several hundred dollars countries, because that research is going to go ahead
for a year’s supply. Because of the outcry over this anyway on the strength of returns in OECD markets.
issue, several pharmaceutical companies have chosen I cannot say how realistic this proposal is. To
not to defend their patents over these drugs in poor implement it would require that firms producing
African countries. pharmaceuticals in developing countries based on

Bulletin of the World Health Organization, 2001, 79 (9) 831

Special Theme – Globalization

others’ discoveries could not sell these products Conclusions

back into rich country markets. Inevitably, there
would be a black market, but it could probably be The bottom line is that global economic integration can
kept fairly small. Lanjouw’s proposal nicely illus- be a powerful force for increasing incomes and hence
trates how developing countries can gain from improving health and other aspects of welfare, but for
protecting IPRs in health fields in some cases, that potential to be fulfilled, complementary policies
while, at the same time, recognizing that there is within developing countries and further improvements
in the international architecture, for example, in
little justification for protecting IPRs in all cases.
intellectual property rights, are required. n
There have been other recent proposals to
strengthen incentives for research on health
technologies through subsidies, including guaran- Acknowledgements
tees of markets if successful drugs can be I thank Martha Ainsworth, Shanta Devarajan, Jean
developed, for example, for antimalarials (21). Lanjouw, Chris Lovelace and Mead Over for helpful
suggestions and comments.
The general point here is that the international
architecture to encourage innovation in health
technologies could be vastly improved. Conflicts of interest: none declared.

Résumé
La mondialisation est-elle favorable à la santé ?
Dans le présent article, l’auteur examine quatre points exemple frappant. Cependant, le problème du SIDA
concernant le rapport entre mondialisation et santé. Tout touche gravement aussi bien les pays en développement
d’abord, l’intégration économique est un moteur relativement ouverts que ceux qui sont relativement
puissant d’accroissement des revenus dans les pays fermés. La solution pratique réside dans les politiques
pauvres. Ces vingt dernières années, plusieurs grands sanitaires et non dans les politiques d’intégration
pays en développement se sont ouverts au commerce et économique. De même, la libéralisation du commerce
à l’investissement et progressent rapidement, plus vite du tabac conduira à une augmentation du tabagisme si
même que les pays riches. Ensuite, l’inégalité des revenus l’on ne met pas en place des politiques de dissuasion
ne tend pas à s’aggraver dans les pays qui adoptent une reposant sur des arguments sanitaires. L’intégration
politique d’ouverture. La croissance rapide qui accompa- mondiale exige des institutions et des politiques de
gne la mondialisation dans les pays en développement soutien. Enfin, il est possible d’améliorer l’architecture
profite en général aux pauvres. Comme le lien entre le internationale de façon qu’elle profite davantage aux
revenu des pauvres et leur état de santé est pays pauvres. Par exemple, en ce qui concerne les droits
abondamment documenté, nous pouvons raisonnable- de propriété intellectuelle, il pourrait être envisageable
ment penser que la mondialisation a des effets positifs que les laboratoires pharmaceutiques innovants choi-
indirects sur la nutrition, la mortalité infantile et d’autres sissent de détenir des droits de propriété intellectuelle sur
aspects de la santé liés au revenu. Troisièmement, il est les marchés de pays riches ou de pays pauvres, mais non
évident que l’intégration économique peut aussi avoir sur les deux. Cette façon de faire pourrait constituer un
des effets négatifs sur la santé : la transmission du SIDA encouragement puissant à la recherche sur les maladies
par le biais des migrations et des voyages en est un aussi bien dans les pays riches que dans les pays pauvres.

Resumen
¿Es la globalización buena para la salud?
En este artı́culo se destacan cuatro puntos sobre la los ingresos. En tercer lugar, es evidente que la
globalización y la salud. En primer lugar, la integración integración económica también puede tener efectos
económica es un medio muy eficaz para aumentar los perjudiciales para la salud: la propagación del SIDA
ingresos de los paı́ses pobres. En los últimos veinte propiciada por las migraciones y los viajes es un ejemplo
años, varios paı́ses en desarrollo de grandes dimensio- reciente y trágico de ello. No obstante, el SIDA
nes que se han abierto al comercio y la inversión están constituye un problema grave tanto en los paı́ses en
creciendo satisfactoriamente, más que los paı́ses ricos. desarrollo relativamente cerrados como en los relativa-
En segundo lugar, la desigualdad de ingresos no tiende mente abiertos. La solución práctica radica en las
a aumentar en los paı́ses que abren sus fronteras. El polı́ticas sanitarias, no en polı́ticas de integración
aumento del crecimiento asociado a la globalización en económica. Del mismo modo, el libre comercio del
los paı́ses en desarrollo suele beneficiar a los pobres. El tabaco provocará un aumento del consumo, salvo que
abundante número de estudios que han relacionado los se establezcan mecanismos de disuasión relacionados
ingresos de los pobres y la situación sanitaria nos con la salud. La integración mundial requiere que se
autoriza a pensar que la globalización tiene efectos respalden las instituciones y las polı́ticas. En cuarto
positivos indirectos en la nutrición, la mortalidad de lugar, cabe mejorar el marco internacional de modo que
lactantes y otros aspectos de la salud relacionados con resulte más beneficioso para los paı́ses pobres. Por

832 Bulletin of the World Health Organization, 2001, 79 (9)

 Is globalization good for your health?

ejemplo, en lo que respecta a los derechos de propiedad paı́ses pobres, pero no en ambos. De este modo, tanto
intelectual, a las empresas farmacéuticas innovadoras en los paı́ses ricos como en los pobres podrı́a haber
les podrı́a resultar práctico elegir entre asegurarse esos fuertes incentivos para investigar enfermedades.
derechos en mercados de paı́ses ricos o en mercados de

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