positive and negative effects of globalization research paper

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Research Article

Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities

* E-mail: [email protected]

Affiliations Faculty of Management, Universiti Teknologi Malaysia (UTM), Johor, Malaysia, Department of Management, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran

Affiliation Applied Statistics Department, Economics and Administration Faculty, University of Malaya, Kuala Lumpur, Malaysia

• Parisa Samimi, 
• Hashem Salarzadeh Jenatabadi

• Published: April 10, 2014
• https://doi.org/10.1371/journal.pone.0087824
• Reader Comments

This study was carried out to investigate the effect of economic globalization on economic growth in OIC countries. Furthermore, the study examined the effect of complementary policies on the growth effect of globalization. It also investigated whether the growth effect of globalization depends on the income level of countries. Utilizing the generalized method of moments (GMM) estimator within the framework of a dynamic panel data approach, we provide evidence which suggests that economic globalization has statistically significant impact on economic growth in OIC countries. The results indicate that this positive effect is increased in the countries with better-educated workers and well-developed financial systems. Our finding shows that the effect of economic globalization also depends on the country’s level of income. High and middle-income countries benefit from globalization whereas low-income countries do not gain from it. In fact, the countries should receive the appropriate income level to be benefited from globalization. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

Citation: Samimi P, Jenatabadi HS (2014) Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities. PLoS ONE 9(4): e87824. https://doi.org/10.1371/journal.pone.0087824

Editor: Rodrigo Huerta-Quintanilla, Cinvestav-Merida, Mexico

Received: November 5, 2013; Accepted: January 2, 2014; Published: April 10, 2014

Copyright: © 2014 Samimi, Jenatabadi. This is an open-access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Funding: The study is supported by the Ministry of Higher Education of Malaysia, Malaysian International Scholarship (MIS). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Competing interests: The authors have declared that no competing interests exist.

Introduction

Globalization, as a complicated process, is not a new phenomenon and our world has experienced its effects on different aspects of lives such as economical, social, environmental and political from many years ago [1] – [4] . Economic globalization includes flows of goods and services across borders, international capital flows, reduction in tariffs and trade barriers, immigration, and the spread of technology, and knowledge beyond borders. It is source of much debate and conflict like any source of great power.

The broad effects of globalization on different aspects of life grab a great deal of attention over the past three decades. As countries, especially developing countries are speeding up their openness in recent years the concern about globalization and its different effects on economic growth, poverty, inequality, environment and cultural dominance are increased. As a significant subset of the developing world, Organization of Islamic Cooperation (OIC) countries are also faced by opportunities and costs of globalization. Figure 1 shows the upward trend of economic globalization among different income group of OIC countries.

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https://doi.org/10.1371/journal.pone.0087824.g001

Although OICs are rich in natural resources, these resources were not being used efficiently. It seems that finding new ways to use the OICs economic capacity more efficiently are important and necessary for them to improve their economic situation in the world. Among the areas where globalization is thought, the link between economic growth and globalization has been become focus of attention by many researchers. Improving economic growth is the aim of policy makers as it shows the success of nations. Due to the increasing trend of globalization, finding the effect of globalization on economic growth is prominent.

The net effect of globalization on economic growth remains puzzling since previous empirical analysis did not support the existent of a systematic positive or negative impact of globalization on growth. Most of these studies suffer from econometrics shortcoming, narrow definition of globalization and small number of countries. The effect of economic globalization on the economic growth in OICs is also ambiguous. Existing empirical studies have not indicated the positive or negative impact of globalization in OICs. The relationship between economic globalization and economic growth is important especially for economic policies.

Recently, researchers have claimed that the growth effects of globalization depend on the economic structure of the countries during the process of globalization. The impact of globalization on economic growth of countries also could be changed by the set of complementary policies such as improvement in human capital and financial system. In fact, globalization by itself does not increase or decrease economic growth. The effect of complementary policies is very important as it helps countries to be successful in globalization process.

In this paper, we examine the relationship between economic globalization and growth in panel of selected OIC countries over the period 1980–2008. Furthermore, we would explore whether the growth effects of economic globalization depend on the set of complementary policies and income level of OIC countries.

The paper is organized as follows. The next section consists of a review of relevant studies on the impact of globalization on growth. Afterward the model specification is described. It is followed by the methodology of this study as well as the data sets that are utilized in the estimation of the model and the empirical strategy. Then, the econometric results are reported and discussed. The last section summarizes and concludes the paper with important issues on policy implications.

Literature Review

The relationship between globalization and growth is a heated and highly debated topic on the growth and development literature. Yet, this issue is far from being resolved. Theoretical growth studies report at best a contradictory and inconclusive discussion on the relationship between globalization and growth. Some of the studies found positive the effect of globalization on growth through effective allocation of domestic resources, diffusion of technology, improvement in factor productivity and augmentation of capital [5] , [6] . In contrast, others argued that globalization has harmful effect on growth in countries with weak institutions and political instability and in countries, which specialized in ineffective activities in the process of globalization [5] , [7] , [8] .

Given the conflicting theoretical views, many studies have been empirically examined the impact of the globalization on economic growth in developed and developing countries. Generally, the literature on the globalization-economic growth nexus provides at least three schools of thought. First, many studies support the idea that globalization accentuates economic growth [9] – [19] . Pioneering early studies include Dollar [9] , Sachs et al. [15] and Edwards [11] , who examined the impact of trade openness by using different index on economic growth. The findings of these studies implied that openness is associated with more rapid growth.

In 2006, Dreher introduced a new comprehensive index of globalization, KOF, to examine the impact of globalization on growth in an unbalanced dynamic panel of 123 countries between 1970 and 2000. The overall result showed that globalization promotes economic growth. The economic and social dimensions have positive impact on growth whereas political dimension has no effect on growth. The robustness of the results of Dreher [19] is approved by Rao and Vadlamannati [20] which use KOF and examine its impact on growth rate of 21 African countries during 1970–2005. The positive effect of globalization on economic growth is also confirmed by the extreme bounds analysis. The result indicated that the positive effect of globalization on growth is larger than the effect of investment on growth.

The second school of thought, which supported by some scholars such as Alesina et al. [21] , Rodrik [22] and Rodriguez and Rodrik [23] , has been more reserve in supporting the globalization-led growth nexus. Rodriguez and Rodrik [23] challenged the robustness of Dollar (1992), Sachs, Warner et al. (1995) and Edwards [11] studies. They believed that weak evidence support the idea of positive relationship between openness and growth. They mentioned the lack of control for some prominent growth indicators as well as using incomprehensive trade openness index as shortcomings of these works. Warner [24] refuted the results of Rodriguez and Rodrik (2000). He mentioned that Rodriguez and Rodrik (2000) used an uncommon index to measure trade restriction (tariffs revenues divided by imports). Warner (2003) explained that they ignored all other barriers on trade and suggested using only the tariffs and quotas of textbook trade policy to measure trade restriction in countries.

Krugman [25] strongly disagreed with the argument that international financial integration is a major engine of economic development. This is because capital is not an important factor to increase economic development and the large flows of capital from rich to poor countries have never occurred. Therefore, developing countries are unlikely to increase economic growth through financial openness. Levine [26] was more optimistic about the impact of financial liberalization than Krugman. He concluded, based on theory and empirical evidences, that the domestic financial system has a prominent effect on economic growth through boosting total factor productivity. The factors that improve the functioning of domestic financial markets and banks like financial integration can stimulate improvements in resource allocation and boost economic growth.

The third school of thoughts covers the studies that found nonlinear relationship between globalization and growth with emphasis on the effect of complementary policies. Borensztein, De Gregorio et al. (1998) investigated the impact of FDI on economic growth in a cross-country framework by developing a model of endogenous growth to examine the role of FDI in the economic growth in developing countries. They found that FDI, which is measured by the fraction of products produced by foreign firms in the total number of products, reduces the costs of introducing new varieties of capital goods, thus increasing the rate at which new capital goods are introduced. The results showed a strong complementary effect between stock of human capital and FDI to enhance economic growth. They interpreted this finding with the observation that the advanced technology, brought by FDI, increases the growth rate of host economy when the country has sufficient level of human capital. In this situation, the FDI is more productive than domestic investment.

Calderón and Poggio [27] examined the structural factors that may have impact on growth effect of trade openness. The growth benefits of rising trade openness are conditional on the level of progress in structural areas including education, innovation, infrastructure, institutions, the regulatory framework, and financial development. Indeed, they found that the lack of progress in these areas could restrict the potential benefits of trade openness. Chang et al. [28] found that the growth effects of openness may be significantly improved when the investment in human capital is stronger, financial markets are deeper, price inflation is lower, and public infrastructure is more readily available. Gu and Dong [29] emphasized that the harmful or useful growth effect of financial globalization heavily depends on the level of financial development of economies. In fact, if financial openness happens without any improvement in the financial system of countries, growth will replace by volatility.

However, the review of the empirical literature indicates that the impact of the economic globalization on economic growth is influenced by sample, econometric techniques, period specifications, observed and unobserved country-specific effects. Most of the literature in the field of globalization, concentrates on the effect of trade or foreign capital volume (de facto indices) on economic growth. The problem is that de facto indices do not proportionally capture trade and financial globalization policies. The rate of protections and tariff need to be accounted since they are policy based variables, capturing the severity of trade restrictions in a country. Therefore, globalization index should contain trade and capital restrictions as well as trade and capital volume. Thus, this paper avoids this problem by using a comprehensive index which called KOF [30] . The economic dimension of this index captures the volume and restriction of trade and capital flow of countries.

Despite the numerous studies, the effect of economic globalization on economic growth in OIC is still scarce. The results of recent studies on the effect of globalization in OICs are not significant, as they have not examined the impact of globalization by empirical model such as Zeinelabdin [31] and Dabour [32] . Those that used empirical model, investigated the effect of globalization for one country such as Ates [33] and Oyvat [34] , or did it for some OIC members in different groups such as East Asia by Guillaumin [35] or as group of developing countries by Haddad et al. [36] and Warner [24] . Therefore, the aim of this study is filling the gap in research devoted solely to investigate the effects of economic globalization on growth in selected OICs. In addition, the study will consider the impact of complimentary polices on the growth effects of globalization in selected OIC countries.

Model Specification

Methodology and Data

This paper applies the generalized method of moments (GMM) panel estimator first suggested by Anderson and Hsiao [38] and later developed further by Arellano and Bond [39] . This flexible method requires only weak assumption that makes it one of the most widely used econometric techniques especially in growth studies. The dynamic GMM procedure is as follow: first, to eliminate the individual effect form dynamic growth model, the method takes differences. Then, it instruments the right hand side variables by using their lagged values. The last step is to eliminate the inconsistency arising from the endogeneity of the explanatory variables.

The consistency of the GMM estimator depends on two specification tests. The first is a Sargan test of over-identifying restrictions, which tests the overall validity of the instruments. Failure to reject the null hypothesis gives support to the model. The second test examines the null hypothesis that the error term is not serially correlated.

The GMM can be applied in one- or two-step variants. The one-step estimators use weighting matrices that are independent of estimated parameters, whereas the two-step GMM estimator uses the so-called optimal weighting matrices in which the moment conditions are weighted by a consistent estimate of their covariance matrix. However, the use of the two-step estimator in small samples, as in our study, has problem derived from proliferation of instruments. Furthermore, the estimated standard errors of the two-step GMM estimator tend to be small. Consequently, this paper employs the one-step GMM estimator.

In the specification, year dummies are used as instrument variable because other regressors are not strictly exogenous. The maximum lags length of independent variable which used as instrument is 2 to select the optimal lag, the AR(1) and AR(2) statistics are employed. There is convincing evidence that too many moment conditions introduce bias while increasing efficiency. It is, therefore, suggested that a subset of these moment conditions can be used to take advantage of the trade-off between the reduction in bias and the loss in efficiency. We restrict the moment conditions to a maximum of two lags on the dependent variable.

Data and Empirical Strategy

We estimated Eq. (1) using the GMM estimator based on a panel of 33 OIC countries. Table S1 in File S1 lists the countries and their income groups in the sample. The choice of countries selected for this study is primarily dictated by availability of reliable data over the sample period among all OIC countries. The panel covers the period 1980–2008 and is unbalanced. Following [40] , we use annual data in order to maximize sample size and to identify the parameters of interest more precisely. In fact, averaging out data removes useful variation from the data, which could help to identify the parameters of interest with more precision.

The dependent variable in our sample is logged per capita real GDP, using the purchasing power parity (PPP) exchange rates and is obtained from the Penn World Table (PWT 7.0). The economic dimension of KOF index is derived from Dreher et al. [41] . We use some other variables, along with economic globalization to control other factors influenced economic growth. Table S2 in File S2 shows the variables, their proxies and source that they obtain.

We relied on the three main approaches to capture the effects of economic globalization on economic growth in OIC countries. The first one is the baseline specification (Eq. (1)) which estimates the effect of economic globalization on economic growth.

The second approach is to examine whether the effect of globalization on growth depends on the complementary policies in the form of level of human capital and financial development. To test, the interactions of economic globalization and financial development (KOF*FD) and economic globalization and human capital (KOF*HCS) are included as additional explanatory variables, apart from the standard variables used in the growth equation. The KOF, HCS and FD are included in the model individually as well for two reasons. First, the significance of the interaction term may be the result of the omission of these variables by themselves. Thus, in that way, it can be tested jointly whether these variables affect growth by themselves or through the interaction term. Second, to ensure that the interaction term did not proxy for KOF, HCS or FD, these variables were included in the regression independently.

In the third approach, in order to study the role of income level of countries on the growth effect of globalization, the countries are split based on income level. Accordingly, countries were classified into three groups: high-income countries (3), middle-income (21) and low-income (9) countries. Next, dummy variables were created for high-income (Dum 3), middle-income (Dum 2) and low-income (Dum 1) groups. Then interaction terms were created for dummy variables and KOF. These interactions will be added to the baseline specification.

Findings and Discussion

This section presents the empirical results of three approaches, based on the GMM -dynamic panel data; in Tables 1 – 3 . Table 1 presents a preliminary analysis on the effects of economic globalization on growth. Table 2 displays coefficient estimates obtained from the baseline specification, which used added two interaction terms of economic globalization and financial development and economic globalization and human capital. Table 3 reports the coefficients estimate from a specification that uses dummies to capture the impact of income level of OIC countries on the growth effect of globalization.

https://doi.org/10.1371/journal.pone.0087824.t001

https://doi.org/10.1371/journal.pone.0087824.t002

https://doi.org/10.1371/journal.pone.0087824.t003

The results in Table 1 indicate that economic globalization has positive impact on growth and the coefficient is significant at 1 percent level. The positive effect is consistent with the bulk of the existing empirical literature that support beneficial effect of globalization on economic growth [9] , [11] , [13] , [19] , [42] , [43] .

According to the theoretical literature, globalization enhances economic growth by allocating resources more efficiently as OIC countries that can be specialized in activities with comparative advantages. By increasing the size of markets through globalization, these countries can be benefited from economic of scale, lower cost of research and knowledge spillovers. It also augments capital in OICs as they provide a higher return to capital. It has raised productivity and innovation, supported the spread of knowledge and new technologies as the important factors in the process of development. The results also indicate that growth is enhanced by lower level of government expenditure, lower level of inflation, higher level of human capital, deeper financial development, more domestic investment and better institutions.

Table 2 represents that the coefficients on the interaction between the KOF, HCS and FD are statistically significant at 1% level and with the positive sign. The findings indicate that economic globalization not only directly promotes growth but also indirectly does via complementary reforms. On the other hand, the positive effect of economic globalization can be significantly enhanced if some complementary reforms in terms of human capital and financial development are undertaken.

In fact, the implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. However, countries with higher level of human capital can be better and faster to imitate and implement the transferred technologies. Besides, the financial openness brings along the knowledge and managerial for implementing the new technology. It can be helpful in improving the level of human capital in host countries. Moreover, the strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in developing countries. Overall, with higher level of human capital and stronger financial systems, the globalized countries benefit from the growth effect of globalization. The obtained results supported by previous studies in relative to financial and trade globalization such as [5] , [27] , [44] , [45] .

Table (3 ) shows that the estimated coefficients on KOF*dum3 and KOF*dum2 are statistically significant at the 5% level with positive sign. The KOF*dum1 is statistically significant with negative sign. It means that increase in economic globalization in high and middle-income countries boost economic growth but this effect is diverse for low-income countries. The reason might be related to economic structure of these countries that are not received to the initial condition necessary to be benefited from globalization. In fact, countries should be received to the appropriate income level to be benefited by globalization.

The diagnostic tests in tables 1 – 3 show that the estimated equation is free from simultaneity bias and second-order correlation. The results of Sargan test accept the null hypothesis that supports the validity of the instrument use in dynamic GMM.

Conclusions and Implications

Numerous researchers have investigated the impact of economic globalization on economic growth. Unfortunately, theoretical and the empirical literature have produced conflicting conclusions that need more investigation. The current study shed light on the growth effect of globalization by using a comprehensive index for globalization and applying a robust econometrics technique. Specifically, this paper assesses whether the growth effects of globalization depend on the complementary polices as well as income level of OIC countries.

Using a panel data of OIC countries over the 1980–2008 period, we draw three important conclusions from the empirical analysis. First, the coefficient measuring the effect of the economic globalization on growth was positive and significant, indicating that economic globalization affects economic growth of OIC countries in a positive way. Second, the positive effect of globalization on growth is increased in countries with higher level of human capital and deeper financial development. Finally, economic globalization does affect growth, whether the effect is beneficial depends on the level of income of each group. It means that economies should have some initial condition to be benefited from the positive effects of globalization. The results explain why some countries have been successful in globalizing world and others not.

The findings of our study suggest that public policies designed to integrate to the world might are not optimal for economic growth by itself. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

The policy implications of this study are relatively straightforward. Integrating to the global economy is only one part of the story. The other is how to benefits more from globalization. In this respect, the responsibility of policymakers is to improve the level of educated workers and strength of financial systems to get more opportunities from globalization. These economic policies are important not only in their own right, but also in helping developing countries to derive the benefits of globalization.

However, implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. In fact, countries with higher level of human capital can better and faster imitate and implement the transferred technologies. The higher level of human capital and certain skill of human capital determine whether technology is successfully absorbed across countries. This shows the importance of human capital in the success of countries in the globalizing world.

Financial openness in the form of FDI brings along the knowledge and managerial for implementing the new technology. It can be helpful in upgrading the level of human capital in host countries. Moreover, strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in OICs.

In addition, the results show that economic globalization does affect growth, whether the effect is beneficial depends on the level of income of countries. High and middle income countries benefit from globalization whereas low-income countries do not gain from it. As Birdsall [46] mentioned globalization is fundamentally asymmetric for poor countries, because their economic structure and markets are asymmetric. So, the risks of globalization hurt the poor more. The structure of the export of low-income countries heavily depends on primary commodity and natural resource which make them vulnerable to the global shocks.

The major research limitation of this study was the failure to collect data for all OIC countries. Therefore future research for all OIC countries would shed light on the relationship between economic globalization and economic growth.

Supporting Information

Sample of Countries.

https://doi.org/10.1371/journal.pone.0087824.s001

The Name and Definition of Indicators.

https://doi.org/10.1371/journal.pone.0087824.s002

Author Contributions

Conceived and designed the experiments: PS. Performed the experiments: PS. Analyzed the data: PS. Contributed reagents/materials/analysis tools: PS HSJ. Wrote the paper: PS HSJ.

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The impact of economic, social, and political globalization and democracy on life expectancy in low-income countries: are sustainable development goals contradictory?

• Published: 18 January 2021
• Volume 23 , pages 13508–13525, ( 2021 )

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• Arif Eser Guzel   ORCID: orcid.org/0000-0001-5072-9527 1 ,
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The 17 Sustainable Development Goals announced by the United Nations are important guides for the development processes of developing countries. However, achieving all of these goals is only possible if the goals are consistent with each other. It has been observed in the literature that possible contradictions between these goals are ignored. Therefore, the main purpose of this study is to investigate whether two sustainable development goals (SDGs) of the UN are contradictory or supporting each other in low-income countries. These SDGs are “Good Health and Well-Being” (SDG3) and “Partnerships for the Goals” (SDG17). For this purpose, the role of globalization and democracy in life expectancy is empirically investigated in 16 low-income countries over the period 1970–2017. While globalization has been used as an indicator of the partnership between countries, democracy has been used as an indicator of accountability and cooperation between governments and societies. According to estimations of the continuous-updated fully modified (CUP-FM) and bias-adjusted ordinary least squares (BA-OLS), globalization and its subcomponents such as economic, social, and political globalization affect life expectancy positively. Democracy also increases life expectancy in those countries. The GDP per capita is also used as a control variable. Our results show that a higher level of per capita income is positively associated with higher levels of life expectancy. In conclusion, no contradiction was found between SDG3 and SDG17 in those countries. Achieving a healthier society requires economic, social, and political integration between governments and societies.

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1 Introduction

The main problem of economics is to increase economic development and social welfare. Increasing the social welfare level is a complex process that depends on economic and non-economic factors. Achieving economic development or increasing the level of welfare depends on achieving and sustaining the main objectives in political, economic, and social areas. Today, development is no longer a process that can be realized through policies implemented by governments alone. It requires cooperation between governments and societies. While cooperation between different countries requires globalization in the economic, social, and political fields, democracy is the way to ensure cooperation between governments and societies.

Health is one of the most important indicators of social welfare. Besides being one of the indicators of development, it is one of the determinants of human capital formation which is necessary for economic development. Individuals living in developed countries live a healthier life compared to those living in less developed countries. While the differences between the levels of development of countries determine the health conditions, at the same time, improvement of public health paves the way for economic development. Healthy people have higher opportunities to earn a higher income than unhealthy people. Individuals with higher incomes can benefit from better nutrition and access to health services. Therefore, economic development and improvement of health conditions represent a two-way process. In this context, the determination of the variables that will enable the achievement of the goal of a healthier society is especially important in explaining the economic differences between developing countries and developed countries. Because of its importance, health-related goals have an important place both among the Millennium Development Goals (MDGs) and the Sustainable Development Goals (SDGs) announced by the United Nations.

The world leaders with the support of international funding organizations announced the Millennium Declaration in September 2000 at the United Nations Headquarters in New York. They committed their nations to a new international partnership to achieve some development targets having with the final deadline of 2015. The Millennium Development Goals (MDGs) consist of 8 goals, 21 targets, and 60 related indicators covering a wide spectrum of development areas such as “End Poverty and Hunger (MDG 1),” “Universal Education (MDG 2),” “Gender Equality (MDG 3),” “Child Health (MDG 4),” “Maternal Health (MDG 5),” “Combat HIV/AIDS (MDG 6),” “Environmental Sustainability (MDG 7),” and “Global Partnership (MDG 8).” As we see, three of the goals are directly associated with the health status of the people. In the deadline of 2015, according to “Health in 2015: From MDGs to SDGs” report of the World Health Organization (WHO), there are improvements in health-related targets such as child health, maternal health, and combat with HIV/AIDS. Globally, HIV, tuberculosis, and malaria targets have been met. Also, the child mortality rate was reduced by 53% and maternal mortality by 43% (WHO 2016 ). On a global view, although health-related problems are largely resolved, the situation is not as good for low-income countries. As shown in Fig.  1 , significant differences exist between developing countries and developed countries in achieving health-related goals.

Source Halisçelik and Soytas (2015)

World Bank Income Groups’ MDGs Index Values in 2015.

According to MDGs, indexes in the context of health status show that the goals desired in terms of health are not attained in low-income countries compared to other income groups. After the deadline of MDGs, the United Nations has announced 17 SDGs, and “Good Health and Well-Being” takes its place as the third goal. Since achieving these goals requires the cooperation of countries and societies, “Partnership for the Goals” is determined as the seventeenth SDG. According to the United Nations ( 2019 ), the main indicators of global partnerships are trade, foreign direct investments, remittances, financial integration technology transfers, data monitoring and accountability, internet usage, and political integration among countries. In our study, while globalization is used as a proxy indicator of global cooperation, democracy is an indicator of cooperation between societies and governments. Democracy also refers to accountability levels of governments.

Globalization can simply be defined as the process of international integration which has economic, social, and political dimensions (Dreher 2006 ). Many countries have adapted to this process and have enjoyed the welfare effects of globalization by implementing necessary economic and institutional transformation. However, some countries still suffer from poor adaption to global markets. According to the KOF Globalization Index published by the Swiss Economic Institute ( 2020 ), low-income countries have the lowest globalization level compared to other income groups. They also suffer from bad health conditions such as low life expectancy, communicable diseases, and high mortality rates according to MDG indexes given above. At this point, the literature is divided into two parts. The first one blames globalization and argues that poverty and as a result of this, low life expectancy derives from the inequality created by globalization itself (Buss 2002 ). The second group mostly focuses on the benefits of free trade, capital mobility, and technology transfers (Rao and Vadlamannati 2011 ). The low-income countries also suffer from low institutional quality in the context of democracy and political rights. According to Freedom House’s list of electoral democracies, the countries without electoral democracy are mostly the low-income countries in the Middle East, North Africa, Sub-Saharan Africa, and Southeast Asia (Freedom House 2019 ).

The main question of our study is to determine whether the problem of low life expectancy in low-income countries is due to the low levels of globalization and weak political institutions in these countries. To answer this question, the role of economic, social, and political globalization and democracy in life expectancy in those countries is empirically investigated. This study provides several contributions to previous literature. First, we provide a new perspective in the context of sustainable development goals. Previous studies mostly focused on how to achieve SDGs, while possible conflicts between the goals were mostly ignored especially in the context of health. Such conflicts between sustainable development goals in the literature have mostly focused on the impact of economic growth and globalization on the sustainable environment (Ulucak and Bilgili 2018 ; Zafar et al. 2019a ). Those studies are mostly addressed the relationship between SDG7, SDG8, SDG13, and SDG17 (Zafar et al. 2019b ). To the best of our knowledge, it is the first study that investigates the relationship between SDG3 and SDG17. It is also important to examine this relationship in low-income countries since they still suffer from low levels of life expectancy, less adaptation to globalization, and poor democratic institutions compared to other income groups. Previous works mostly provide global evidence, while only a few studies focus on less developed countries. Achieving these 17 goals put forward by the United Nations at the same time is possible only if these goals do not conflict with each other. Second, empirical works in previous literature consist of traditional estimation methods called first-generation tests. In the analysis of panel data, the estimators considering cross-sectional dependence are called the second-generation estimators. Cross-sectional dependency simply refers to the situation when the shock that occurs in one country affects other countries as well. The source of this problem encountered in panel data analysis is the economic, financial, and political integration among countries (Menyah et al. 2014 ). The ignorance of cross-sectional dependence results in biased and inconsistent estimates and wrong inferences (De Hoyos and Sarafidis 2006 ; Chudik and Pesaran 2013 ). Low-income countries are mostly African countries where there is a rising trend in terms of integration to global markets and institutions (Beck et al. 2011 ). Using estimation techniques that consider cross-sectional dependence in those countries prevents misleading results. As the literature is divided into two parts about the effects of globalization on human well-being, fresh evidence via robust estimation methods is required in order to provide proper policy implications. To fill this gap, our work provides second-generation estimations.

2 Literature review

To improve the health conditions of a country, the welfare of the poor should be improved as well. Poverty is detrimental to access to health services. Therefore, the positive impact of globalization on health first emerged with its positive effects on economic growth (Labonté et al. 2009 : 10). The effects of globalization on growth were mostly driven by free trade, international specialization, technology transfers, knowledge spillovers, and competitive markets. It also offers broader opportunities for entrepreneurs and paves the way for innovation (Grossman and Helpman 2015 : 101). As expected, poverty rates significantly reduced in the last two decades because of the integration of developing economies to global markets (Harrison 2006 ). When trade liberalization and income increases are considered together, people's access to treatments and medications can be easier and life expectancy may be prolonged. However, we should consider other possibilities in the context of spreading communicable diseases. As Deaton ( 2004 ) mentioned before, access to cheap and easy travel can increase the rate of spread of communicable diseases. Migration is also another fact to take into account. Particularly rising sexual tourism and migrant sex workers increase the spread of sexually transmitted diseases such as HIV/AIDS. But today there are improved treatment methods to solve these problems. Even HIV-infected people can survive with antiretroviral therapy, and it also reduces sexual transmission of the infection (Dollar 2001 ; Cohen et al. 2011 ). Due to the high cost of advanced drugs as in the case of antiretroviral therapy, it should be accepted that people in low-income countries will have trouble accessing the drugs (Buss 2002 ). There are approaches known as the unequal exchange that globalization increases inequality among countries and that developed countries are more profitable from the globalization process (Love, 1980 ). It may also increase domestic income inequality. There are a few studies that came with the conclusion that globalization rises inequality (Dreher and Gaston 2008 ; Ha 2012 ), but Bergh and Nilsson ( 2010 ) suggested a different perspective. Due to extensive R&D investments and scientific activities, developed countries can find new treatment methods and supply advanced drugs. The only way to access that knowledge and these drugs are trade and integration between developed and underdeveloped countries. Globalization can play an important role in improving the health conditions of low-income countries to the extent that it can provide these linkages. One should also notice that wider markets and higher returns are important factors that motivate entrepreneurs. Buss ( 2002 ) claimed that the intellectual property rights of advanced drugs belong to private firms in developed countries, and because of the strong protection of property rights, less developed countries have trouble accessing them. However, rising global human rights became an important step to advance public health issues against economic concerns in the trade of pharmaceutical products.

The human rights approach focuses on how globalization affected disadvantaged people worldwide (Chapman 2009 ). It is an important instrument in the suppression of the inequality created by economic globalization. Because of the pressure on the government about human rights, disadvantaged people are becoming able to meet their basic human needs. The role of political globalization on this point is forcing governments to adopt global institutions. It increases the number of international organizations in which a country is a member. This makes governments more accountable in the global area and forcing them to pay attention to protect human rights. Gelleny and McCoy ( 2001 ) also claimed that integration among countries leads to political stability. Therefore, governments' tendency to violate human rights in order to maintain their power becomes lesser. Moreover, as social dimensions of globalization expand and communication opportunities among people in different countries increase, the possibility of human rights violations being discovered by other people increases (Dreher et al. 2012 ). Governments that know the international sanctions required by these violations have to be more cautious against human rights violations. Social globalization also provides cultural integration among the world’s people, and it changes lifestyles and consumption patterns worldwide. The consequences of this change can have positive and negative effects. First, increased urban population and sedentary lifestyles may enhance prepared food consumption and reduce daily movements which result in rising obesity and diabetes (Hu 2011 ). Second, although rapidly increasing consumption options and diversity are known as welfare indicators, they also can cause stress which is known as an important determinant of many diseases both psychological and physical (Cutler et al. 2006 ). Third, due to knowledge spillovers and communication technology, people can learn about healthy nutrition and protection from communicable diseases. Thus, unhealthy but traditional consumption patterns and lifestyles may change. These days we experience the coronavirus epidemic and we see once again the importance of globalization. Countries are aware of infectious diseases in different parts of the world in a very short time and can take measures to stop the spread of the virus. The changes created by social and political globalization play a major role in this emergence. Social globalization enables people in very remote areas of the world to communicate with each other, while political globalization forces governments to be transparent about infectious diseases.

With economic globalization, increased economic activity may lead to urbanization. One may think about unhealthy conditions of an urban area such as environmental degradation, air and water pollution, higher crime rates, and stress which reduce life expectancy. However, according to Kabir ( 2008 ), people living in an urban area can benefit from improved medical care, easy access to pharmacy, and to the hospitals that use higher technology. They can also get a better education and can enjoy better socioeconomic conditions.

Democracy can be considered as another determinant of life expectancy. In order to solve the health problems of the poor, people should draw the attention of the government. Sen ( 1999 ) claimed that the instrumental role of democracy in solving problems is enabling people to express and support their claims. Thus, the attention of politicians can be attracted to the problems of the poor. Politicians who have never tasted poverty do not have the urge to take action against the problems of the poor at the right time. Another linkage can be established through accountability (Besley and Kudamatsu 2006 ). In democracies, governments have an obligation to account to citizens for what purposes the resources were used. Thus, resources can be allocated to solve important public issues such as quality of life, communicable diseases, and mortality.

Compared to theoretical discussions, previous literature provides a lack of empirical evidence. Barlow and Vissandjee ( 1999 ) examined the determinants of life expectancy with cross-sectional data available in 1990 for 77 developed and developing countries. According to regression results, per capita income, literacy rate, and lower fertility are important determinants of life expectancy while living in a tropical area decreasing it. Another finding in this study shows that health expenditures in those countries failed to increase life expectancy. Following this study, Or ( 2000 ) analyzed the determinants of health outcomes in 21 industrialized OECD countries covering the period 1970–1992. This study presents gender-specific estimates separately for men and women. Fixed effects estimation results reveal a significant negative relationship between public health expenditure and women's premature death. The relationship also occurs for men, while GDP per capita dropped from the regression model due to high collinearity. Furthermore, GDP per capita and the proportion of white-collar workers reduce premature death for both men and women, while alcohol consumption increases it.

Franco et al. ( 2004 ) analyzed the impact of democracy on health utilizing political rights data of 170 countries. Empirical results show that people living in democracies enjoy better health conditions such as longer life expectancy, better maternal health, and lower child mortality. Following this, Besley and Kudamatsu ( 2006 ) investigated the nexus between democracy and health outcomes utilizing panel data from the 1960s to the 2000s. In their study, they used life expectancy at birth and child mortality variables for 146 countries as indicators of health outcomes. According to results, democracy has a positive and significant effect on life expectancy at birth and it also reduces child mortality. Safaei ( 2006 ) also investigated the impact of democracy on life expectancy and adult and child mortality rates with the data of 32 autocratic, 13 incoherent, and 72 democratic countries. According to the OLS estimation results, improving democratic institutions increases life expectancy and reduces child and adult mortality rates. Another finding of the study is that socioeconomic factors such as income, education, and access to health care services are important determinants of health status.

Owen and Wu ( 2007 ) found a positive relationship between trade openness and health outcomes using a panel of 219 countries. Health outcome measures of this study are infant mortality and life expectancy. Trade openness is one of the most important dimensions of globalization.

Kabir ( 2008 ) analyzed the determinants of life expectancy in 91 developing countries. Empirical results obtained are the opposite of the expected. According to results, per capita income, literacy rate, per capita health expenditure, and urbanization have no significant impact on life expectancy. On the other hand, the number of physicians has a positive and significant impact on life expectancy, while malnutrition reduces it. As a dummy variable, living in Sub-Saharan Africa is another factor that reduces life expectancy due to communicable diseases like HIV, malaria, etc.

Bergh and Nilsson ( 2010 ) used a panel of 92 countries in the period 1970–2005 to investigate the relationship between globalization and life expectancy. They used social, political, and economic globalization data separately, and the results show a significant positive effect of economic globalization on life expectancy at birth. But no significant relationship was found between social globalization, political globalization, and life expectancy. They also used average years of education, urban population, the number of physicians, and nutrition as control variables and the effect of economic globalization was still positive and significant.

Welander et al. ( 2015 ) examined the effects of globalization and democracy on child health in their panel data analysis for 70 developing countries covering the period 1970–2009. According to the results, globalization significantly reduces child mortality. In addition, democracy improves child health and it also increases the beneficial effects of globalization on child health. Following this study, Tausch ( 2015 ) analyzed the role of globalization in life expectancy in 99 countries. The results of OLS estimates show that globalization leads to inequality, and therefore, it reduces health performance in terms of life expectancy and infant mortality. These results are contradictory to positive views on the role of globalization in public health. However, in 19 of 99 countries, globalization increases public health performance. Ali and Audi ( 2016 ) also analyzed the role of globalization in life expectancy in Pakistan. According to ARDL estimation results, life expectancy is positively associated with higher levels of globalization. Another study on the Pakistan case proposed by Alam et al. ( 2016 ) concluded that foreign direct investment and trade openness which are important indicators of economic globalization affects life expectancy positively.

Patterson and Veenstra ( 2016 ) concluded that electoral democracies provide better health conditions compared to other countries. Their analysis includes annual data from 168 countries covering the period 1960–2010. Empirical results show democracy has a significant positive impact on life expectancy and it reduces infant mortality.

In their recent study, Shahbaz et al. ( 2019 ) investigated the impact of globalization, financial development, and economic growth on life expectancy. The authors used nonlinear time series analysis methods utilizing the data of 16 Sub-Saharan African countries over the period 1970–2012. Their results show that globalization, financial development, and economic growth affect life expectancy positively in 14 of 16 Sub-Saharan African countries.

The previous literature provides a lack of evidence in the context of globalization, democracy, and life expectancy relationship. There are also methodological weaknesses in previous empirical studies. First, it can be observed that previous studies are mostly based on traditional estimation methods. Second, the panel data analyses are based on the first-generation estimators that assume cross-sectional independence. This assumption is hard to satisfy due to integration among countries. In addition, ignoring the cross-sectional dependence results in inconsistent estimations. Particularly in empirical work in the context of globalization which refers to economic, political, and cultural integration among countries, considering the cross-sectional dependence becomes more important. Therefore, in order to make a methodological contribution to previous literature, we used second-generation panel time series methods considering cross-sectional dependence.

3 Methodology and data

According to the United Nations, achieving sustainable development goals requires global cooperation and partnership. Therefore, “partnerships for goals” has taken its place as the 17th sustainable development target. However, it was emphasized that some sub-goals should be realized in order to reach this goal. These include improving international resource mobility, helping developing countries to attain debt sustainability, promoting the transfer of information and technology between developed and developing countries, an open and rule-based free trade system, encouraging public–private and civil society partnerships, increasing transparency and accountability, and high quality and reliable data (United Nations 2019 ). In our empirical work, economic, social, and political globalization and democracy variables were used as proxies of the subcomponents of SDG17. In addition, the life expectancy at birth variable that mostly used in related literature as a proxy of health status and well-being, it is used in our study as a proxy of SDG3. In this study, we investigated the role of globalization and democracy in life expectancy in 16 low-income countries. Footnote 1 Following Barlow and Vissandjee ( 1999 ) and ( 2000 ), GDP per capita is used as a control variable in order to mitigate omitted variable bias. Our dataset is covering the period 1970–2017. Following the related literature, we present our model as follows:

where lex is life expectancy at birth which refers to the average number of years a newborn is expected to live. Life expectancy at birth data is provided by World Bank ( 2019 ) World Development Indicators. Life expectancy at birth indicates the number of years a newborn infant would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life. The dataset is consisting of a weighted average of collected data from several co-founders. In Eq.  1 , X refers to the KOF Globalization Index developed by Dreher ( 2006 ). This index has been used in previous literature as a proxy of SDG17 (Saint Akadiri et al. 2020 ). The current version of the data published by the Swiss Economic Institute is revised by Gygli et al. ( 2019 ). The globalization variables are between 0–100, and 100 refers to the highest globalization level. In our analysis, we used subcomponents of globalization index such as economic (EC), social (SOS), and political (POL) globalization in addition to overall globalization (GLB). Due to high collinearity, the effects of different types of globalization are analyzed separately. Models 1, 2, 3, and 4 represent the estimations with overall, economic, social, and political globalization indexes, respectively. The democracy variable ( dem ) is provided from the Polity IV project dataset (Marshall and Jaggers 2002 ). While the increases in this indicator represent a more democratic regime, the decreases represent a more autocratic regime. Finally, gdp is real GDP per capita (constant 2010 $) and it is provided from World Bank World Development Indicators. All variables transformed to the logarithmic form except democracy due to negative values. In the estimation of the model, the panel data analysis methods are used.

3.1 Cross-sectional dependence

Traditional panel data methods are based on the assumption that no cross-sectional dependence exists among cross section units. However, this assumption is hard to satisfy due to rising economic, social, and political integration between countries. The estimations do not take this process into account may cause inconsistent results. Such results may also lead to incorrect inferences (Chudik and Pesaran, 2013 ). The existence of cross-sectional dependence in variables and the error term is obtained from the model analyzed with Pesaran ( 2004 ) \({\text{CD}}_{{{\text{LM}}}}\) and Pesaran et al. ( 2008 ) bias-adjusted LM test. These techniques are robust whether N > T and T > N. Therefore, \({CD}_{LM}\) and bias-adjusted LM ( \({LM}_{adj})\) tests are found to be appropriate and their test statistics can be calculated as follows:

Equation  2 shows the calculation of Pesaran ( 2004 ) \({CD}_{LM},\) and Eq.  3 is Pesaran et al. ( 2008 ) bias-adjusted LM test statistic. \({V}_{Tij}\) , \({\mu }_{Tij}\) , and \({\widehat{\rho }}_{ij},\) respectively, represent variance, mean, and the correlation between cross section units. The null and alternative hypothesis for both test statistics; \({H}_{0}\) : No cross-sectional dependence exist; \({H}_{1}\) : Cross-sectional dependence exist.

In the selection of stationarity tests and long-run estimators, the existence of cross-sectional dependence will be decisive. If the null of no cross-sectional dependence is rejected, second-generation methods that assume cross-sectional dependence should be used in order to provide unbiased and consistent estimation results.

3.2 Slope homogeneity

Pesaran and Yamagata ( 2008 ) proposed a method to examine slope heterogeneity in panel data analysis based on the Swamy ( 1970 )’s random coefficient model.

The calculation of the test statistic of Swamy’s model is given in Eq.  4 .

In Eq.  4 , \({\stackrel{\sim }{\beta }}_{i}\) and \({\overbrace{\beta }}_{WFE},\) respectively, indicate the parameters obtained from pooled OLS and weighted fixed effects estimation, while \({M}_{T}\) is the identity matrix. The test statistic obtained from Swamy’s model is improved by Pesaran et al. ( 2008 ) as follows:

where \(\stackrel{\sim }{S}\) is the Swamy test statistic and k is a number of explanatory variables. \({\stackrel{\sim }{\Delta }}_{adj}\) is a bias-adjusted version of \(\stackrel{\sim }{\Delta }\) . \({\stackrel{\sim }{Z}}_{it}\) =k and \(Var\left({\stackrel{\sim }{Z}}_{it}\right)=2k(T-k-1)/T+1\) . The null and alternative hypothesis for both test statistics is given below.

The rejection of the null hypothesis shows that slope coefficients of Eq. 1 are heterogeneous. In the selection of panel data estimation methods, the results of those preliminary analysis are taken into account.

3.3 Unit root test

Pesaran ( 2006 ) suggested a factor modeling approach to solve the cross-sectional dependency problem. This approach is simply based on adding cross-sectional averages to the models as proxies of unobserved common factors. The Cross-sectionally Augmented Dickey–Fuller (CADF) unit root test developed by Pesaran ( 2007 ) is based on that factor modelling approach. This method is an augmented form of Augmented Dickey–Fuller (ADF) regression with lagged cross-sectional average and its first difference to deal with cross-sectional dependence (Baltagi, 2008 : 249). This method considers the cross-sectional dependence and can be used, while N > T and T > N. The CADF regression is:

\({\stackrel{-}{y}}_{t}\) is the average of all N observations. To prevent serial correlation, the regression must be augmented with lagged first differences of both \({y}_{it}\) and \({\stackrel{-}{y}}_{t}\) as follows:

After the calculation of CADF statistics for each cross section ( \({CADF}_{i}\) ), Pesaran ( 2007 ) calculates the CIPS statistic as average of CADF statistics.

If the calculated CIPS statistic exceeds the critical value, it means that the unit root hypothesis is rejected. After the preliminary analysis of unit root, the existence of a long-run relationship between the variables in our model will be investigated via Westerlund and Edgerton ( 2007 ) cointegration test. After this, the long-run coefficients will be estimated using the continuous-updated fully modified (CUP-FM) estimator developed by Bai and Kao ( 2006 ) and Bias-adjusted OLS estimator developed by Westerlund ( 2007 ).

3.4 Cointegration test and long-run relationship

In this study, the cointegration relationship was investigated by Westerlund and Edgerton ( 2007 ) LM bootstrap test. This method considers cross-sectional dependence and provides robust results in small samples (Westerlund and Edgerton, 2007 ). This method is based on the following equation

where \({n}_{ij}\) is an independent and identically distributed process with zero mean and var( \({n}_{ij})\) = \({{\sigma }_{i}}^{2}\) . Westerlund and Edgerton ( 2007 ) suggested following LM test in order to test the null of cointegration

where \({S}_{it}\) is partial sum process of the fully modified estimate of \({z}_{it}\) and \({\widehat{w}}_{i}^{-2}\) is the estimated long-run variance of \({u}_{it}\) conditional on \(\Delta {x}_{it}^{^{\prime}}\) . If the calculated LM statistic is below the critical value, the null of cointegration will be accepted. The critical values will be provided using the bootstrap method in order to prevent cross-sectional dependence.

In the estimation of long-run coefficients, the CUP-FM estimator was used and this method is based on the following regression

where \({\widehat{\lambda }}_{i}^{^{\prime}}\) refers to the estimated factor loadings and \(\hat{y}_{{i,t}}^{ + } = y_{{i,t}} - \left( {\lambda _{i} ^{\prime } \hat{\Omega }_{{F \in i}} + \hat{\Omega }_{{\mu \in i}} } \right)\hat{\Omega }_{{ \in i}}^{{ - 1}} {{\Delta }}x_{{i,t}}\) indicates the transformation of the dependent variable for endogeneity correction. According to Bai and Kao ( 2006 ), CUP-FM estimator is robust under cross-sectional dependence. However, the assumption that the number of common factors (k) is known cannot be satisfied in practice (Westerlund, 2007 ). Therefore, Westerlund ( 2007 ) suggested a bias-adjusted estimator (BA-OLS) following the methodology of Bai and Kao ( 2006 ) except in the context of determining the number of common factors. The author suggested the estimation of k using an information criterion as

where \(IC\left(k\right)\) is the information criterion. In this study, we determined the number of common factors via the Bayesian information criterion (BIC) as follows.

In the equation above, V(k) is the estimated variance of \({\widehat{u}}_{it}\) based on k factors. By minimizing the BIC, we obtain \(\widehat{k}\) . Westerlund ( 2007 ) showed that the estimation of k provides better results compared to CUP-FM estimator assuming k is known. Both of the estimators require cointegrated variables in the long run.

3.5 Empirical results and discussion

The results of Pesaran ( 2004 ) \({CD}_{LM}\) and Pesaran et al. ( 2008 ) bias-adjusted LM tests are given in Table 1 .

The results given in Table 1 show that the null of no cross-sectional dependence is rejected at 1% according to both \({CD}_{LM}\) and \({LM}_{adj}\) test statistics in all variables. In addition, in the error terms obtained from models 1, 2, 3, and 4 the null of no cross-sectional dependence is rejected at 1%. These results show that the methods to be used in the analysis of the stationarity of the variables and the determination of the long-run relationship should consider the cross-sectional dependence.

The results of homogeneity tests developed by Pesaran and Yamagata ( 2008 ) are given in Table 2 . According to the results, the null of homogeneity is accepted at %1 in all models. Therefore, estimators assume parameter homogeneity are used in our analysis.

After the preliminary analysis of cross-sectional dependence, the CADF unit root test developed by Pesaran ( 2007 ) is found to be appropriate for our model because of its robustness under cross-sectional dependence. The results of the CADF unit root test are given in Table 3 .

In the analysis of unit root, constant and trend terms are both considered at level, while only constant term is added at first difference. Maximum lag level is determined as 3, while optimum lag level is determined by F joint test from general to particular. According to results, the null of unit root is accepted for all variables, while calculated CIPS statistics of first-differenced variables exceed 1% critical value. All variables have a unit root, and their first differences are stationary ( \({I}_{1})\) . Therefore, in order to determine the existence of a long-run relationship, we applied Westerlund and Edgerton ( 2007 ) panel cointegration test. This method considers cross-sectional dependence and can be used, while the series are integrated in the same order. The results are shown in Table 4 .

Constant and trend are both considered in the analysis of cointegration, and critical values are obtained from 5000 bootstrap replications. The results show that the null of cointegration is accepted for all models. There is a long-run relationship between life expectancy, globalization, democracy, and GDP per capita. After determining the cointegration relationship, we estimated long-run coefficients utilizing CUP-FM and BA-OLS estimators proposed by Bai and Kao ( 2006 ) and Westerlund ( 2007 ), respectively.

The long-run estimation results given in Table 5 show that overall, economic, social, and political globalization are positively associated with life expectancy at 1% significance level according to both CUP-FM and BA-OLS estimators. The results show that a 1% increase in globalization index increases life expectancy %0.014 and %0.015 according to CUP-FM and BA-OLS estimators, respectively. The impact of economic, social and political globalization indexes is 0.013%, 0.011%, and 0.015% according to CUP-FM estimation results while 0.014%, 0.012%, and 0.017% according to both estimators, respectively.

Our results confirms the findings of Owen and Wu ( 2007 ), Ali and Audi ( 2016 ), and Shahbaz et al. ( 2019 ) who found a positive relationship between globalization and life expectancy. Our empirical work also supports the evidence of Bergh and Nilsson ( 2010 ) in terms of positive effect of economic globalization on life expectancy. While the authors found no significant impact of social and political globalization on life expectancy, our results show that life expectancy is positively associated with both social and political globalization. The results we found contradict Tausch ( 2015 )’s evidences in 80 of 99 countries. However, according to his results, in 19 of 99 countries, globalization affects health positively. When these countries are examined, it is seen that 14 of them are countries in the low and lower-middle income groups. In this sense, it can be said that the evidence we found for low-income countries is in line with the author's evidence. As Dreher ( 2006 ) mentioned, despite its possible inequality effects, the net effect of globalization on development is mostly positive and our empirical work supports that idea. The effect of democracy on life expectancy is also positive and significant at 1% which confirms the findings of Franco et al. ( 2004 ) and Besley and Kudamatsu ( 2006 ). In electoral democracies, people living in poverty and suffering from health problems can easily attract the attention of policymakers compared to autocracies. This leads to the reallocation of resources to solve the primary problems of the society. In the context of sustainable development goals, our results show that there is no conflict between SDG3 (good health and well-being) and SDG17 (partnerships for the goals). The improvement of the health conditions of the poor countries depends on global partnership and economic, social, and political integration among countries. In addition, democracy is an important tool in achieving the goal of a healthy society, as it fosters accountability, transparency, and partnership between governments and the societies they rule. As stated in the introduction section, low-income countries show low performance in terms of health-related sustainable development goals, and their connections with global markets are weak compared to other countries. At the same time, democratic institutions are not developed. Our work supports the idea that in order to achieve SDG3, global partnership and democracy are required.

The GDP per capita that used as a control variable has a positive impact on life expectancy at a 1% level. These results support the evidence of Barlow and Vissandjee ( 1999 ), Or ( 2000 ), and Shahbaz et al. ( 2019 ). Individuals living in countries with high per capita income are expected to have higher welfare and have a longer life expectancy (Judge, 1995 ). In low-income countries where people still suffer from having difficulty in meeting basic human needs, increasing per capita income may lead to better nutritional status, easier access to advanced treatment methods and technology.

4 Conclusion

In this study, the effects of globalization and democracy on life expectancy are empirically investigated in low-income countries. While globalization and democracy indexes are used as proxy indicators of “Partnerships for the Goals (SDG 17),” life expectancy used a proxy of “Good Health and Well-Being (SDG 3).” With this, it is aimed to examine the existence of contradiction between those SDGs. In the estimation of the long-run relationship between the variables, second-generation panel data analysis methods that consider cross-sectional dependency are used. According to the results, the globalization index and its subcomponents such as economic, social, and political globalization are important instruments to achieve a healthier society. In addition, higher levels of democracy lead to higher levels of life expectancy. Finally, GDP per capita growth improves health status of countries.

The findings obtained from our study show that economic, social, and political integration of countries and democracy accelerate the process of achieving a healthier society. Therefore, it is seen that SDG3 and SDG17 targets are compatible with each other. In order to achieve SDG3, economic, social, and political integration between countries should be encouraged and democratic institutions should be improved. Policy makers should remove the barriers on globalization, and they should promote participation on international organizations and public–private and civil society partnerships.

Those countries are Benin, Burkina Faso, Burundi, Central African Republic, Chad, Democratic Republic of Congo, The Gambia, Haiti, Madagascar, Malawi, Mali, Nepal, Niger, Rwanda, Sierra Leone, and Togo.

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Guzel, A.E., Arslan, U. & Acaravci, A. The impact of economic, social, and political globalization and democracy on life expectancy in low-income countries: are sustainable development goals contradictory?. Environ Dev Sustain 23 , 13508–13525 (2021). https://doi.org/10.1007/s10668-021-01225-2

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Globalization and Health

Globalization describes how nations, peoples, and economies are becoming increasingly interconnected and interdependent. Globalization has contributed to health improvements through diffusion of new health knowledge, low-cost health technologies, and human rights. Economic globalization based upon a neoliberal model of liberalized trade and investment and minimal government regulation, however, has brought many health risks. This article outlines the health risks of neoliberal globalization from structural adjustment of the 1980s, through economic financialization of the 1990s and the 2000s, to the financial crisis and global recession of 2008 and subsequent ‘austerity agenda’ of state retrenchment. It concludes with a discussion of high-level public policies that would ensure that globalization works for ‘health for all’.

This article is a revision of the previous edition article by B. Chalmers, volume 9, pp. 6258–6261, © 2001, Elsevier Ltd.

Introduction

Globalization is a relatively new term, first appearing in the 1970s and quickly supplanting earlier concepts sharing roughly similar terrain (internationalization, postcolonialism, new international economic order). Broadly defined, globalization describes how nations, businesses, and people worldwide are becoming more connected and interdependent through increased economic integration and communication exchange, cultural diffusion, and travel. Lee (2002) further considers globalization to be effecting change in spatial, temporal, and cognitive dimensions: social activities increasingly transcend borders and occur more rapidly, as do peoples' understanding of global events and their place in the world. By such an account, globalization is not a new phenomenon; rather, apart from small and geographically isolated settlements, this push, prod, and sharing against ‘borders’ has characterized much of the history of human societies. At base, it is driven by economic and political expansion, whether by trade or conquest.

Some historians date the ‘modern’ era of (Western) globalization with European colonial expansion and the Westphalia formation of nation states in the late seventeenth century. Mercantilism dominated globalization's policies and practices over the next two centuries, as governments supported their local merchant class in competition for an expanding global trade facilitated by technological advances in maritime navigation. A series of late nineteenth-century economic recessions, rising social inequalities, staggering inflation, and nationalist protectionism became the fertile ground from which the Great War emerged, which devastation and lessons failed to find a sufficiently firm political foothold to avoid a recurrence in the Second World War. This foothold became more secure in the 30 years following the Second World War, which saw a new pattern in globalization emerge with the creation of stronger multilateral governance bodies. The United Nations (UN) replaced the League of Nations. The International Monetary Fund (IMF) was created to maintain macroeconomic stability and avoid the recessionary crises underpinning both world wars. The World Bank (WB) was founded to finance reconstruction of war-torn Europe (and later, developing country economies and social infrastructure). The General Agreement on Tariffs and Trade provided a negotiating platform intended to interconnect national economies (at that time, of the high-income developed countries only) in mutually beneficial ways, with the expectation that this would also provide economic disincentives to future war.

Contemporary Globalization

A new ‘contemporary’ globalization began to emerge in the 1970s. More economic recessions, two oil price shocks, profligate international bank lending, an end to fixed currency exchange rates, and a ‘stagflation’ leading to sharp interest rate spikes in the world's (then) major economies combined to create a developing world debt crisis. This crisis provided an opportunity for neoliberal economic theories first advanced by Friedrich Hayek in the 1920s to become policy practice, in the form of structural adjustment programs imposed largely on the heavily foreign indebted countries of Africa and Latin America, which needed financial assistance from the IMF and WB to avoid government default and bankruptcy. The key elements of these programs, later codified as the Washington Consensus, are well known and included such requirements as:

• • privatization of state assets to generate revenue,
• • deregulation of economic markets to promote private sector growth,
• • lower corporate and individual taxes to attract foreign direct investment,
• • reduced government spending and increased cost recovery (user pay for public services), and
• • increased trade and financial liberalization.

These policy prescriptions were intended to increase economic growth and the ability of governments both to service their foreign debt obligations and to reduce their debt burden. Evidence of their effectiveness in doing so is mixed, with other regions of the world not adopting these policies (notably Southeast (SE) Asian countries) performing much better over this period ( Chang, 2005 ). The policies also resulted in a number of health-negative impacts, first documented with respect to children's health in the landmark United Nations International Children Emergency Fund publication, Adjustment with a Human Face ( Cornia et al., 1987 ). Subsequent studies similarly found singularly negative health impacts of structural adjustment programs, attributed to user fees that created barriers to health and education services, labor market adjustments from trade liberalization that led to unemployment or insecure informal work, and tax reductions and the loss of tariffs revenues that reduced government health and social protection spending ( Breman and Shelton, 2001 ). But even as evidence and argument over the economic and health impacts of structural adjustment continued, the neoliberal policy context shaping contemporary globalization became firmly embedded.

Globalization's Positive Health

Even as this neoliberal model of global market integration strengthened its grip on countries' economic policies, civil society movements, the foreign aid arms of governments, and several UN agencies were emphasizing the social dimensions of global health development. Key innovations at this time included the ‘child health revolution’ of the 1980s, with its emphasis on low-cost health interventions: GOBI (Growth monitoring, Oral rehydration, Breastfeeding, Immunization), later followed by the triple FFF (Family planning, Female education, and Food supplementation). Some have argued that much of the improvement in global health during the last half of the twentieth century arose not from economic growth in developing countries, but from health technologies and knowledge transfers between wealthier (developed) and poorer (developing) countries ( Deaton, 2003 ): one indication of globalization's health beneficence.

Ratification by most of the world's countries of international human rights conventions is seen as another health-positive facet of contemporary globalization. Several of these conventions make specific reference to the right to health, and most others deal with rights associated with access to social determinants of health. Though sometimes critiqued for a perceived Western bias (emphasizing individual rather than collective rights) and for their lack of enforcement (apart from ‘naming and shaming’ states that fail to fulfill their obligations under these treaties), international human rights have become a set of global tools used in the struggle for better health throughout much of the world ( Chapman, 2002 ). A global diffusion of concerns for gender equity has also been attributed to globalization, from increased funding to improve conditions for maternal/child health, to new employment opportunities in export-oriented industries allowing women to earn income outside patriarchal social structures. That the poor working conditions in these outsourced factories have become a focus of international and civil society activism attests to another distinguishing quality of contemporary globalization: the breadth and reach of digital communication technologies. These technologies enable not only the more exploitative elements of open markets but also the platforms for oppositional civil society mobilizations.

The past 15 years have also seen global attention to health rise considerably. Health concerns directly informed three of the UN Millennium Development Goals, have been central in bilateral and multilateral development aid policies, and have led to the creation of over 100 global public–private partnerships for health. International financing for health followed suit, increasing substantially over this period, partly on the accumulating evidence that health should be considered an investment in economic growth, rather than a cost (World Bank, 1993; CMH, 2001 ).

Globalization's Negative Health

The emphasis on health as an investment relates to one of the more contentious positive health claims made for globalization: that of the contribution of liberalized markets to economic growth. This argument holds that trade and investment liberalization improves growth, which generates wealth that reduces poverty. Poverty reduction, in turn, improves health (poverty being the single greatest risk condition for disease), creating more productive and skilled workers, which spur the economy to even greater growth and more trickle-down health. It is by interrogating the links in this ‘virtuous circle,’ however, that globalization's health risks begin to emerge.

Most econometric studies do find that trade liberalization is associated with better growth, but this positive relationship is neither automatic nor always observed ( Thorbecke and Nissanke, 2006 ). There also remains doubt about the direction of causality in these studies: does openness lead to growth, or does growth give rise to openness? Many development economists are critical of the assumption that liberalization is inevitably a ‘global public good’ for the economic growth it is presumed to engender. Some argue that trade liberalization rules are ‘kicking away the ladder’ of development policies successfully used by high-income countries in the past, and by middle-income SE Asian economies in the two decades prior to the birth of the World Trade Organization (WTO) in 1995 ( Chang, 2005 ). Others point to evidence that trade and investment liberalization disproportionately benefits larger, wealthier nations with greater factor endowments and the political strength to set the terms of liberalization rules in their favor ( Birdsall, 2006 ). One study of four different scenarios of a completed ‘Doha Development Round’ of WTO negotiations (so named as it was intended to give more attention to the economic interests of developing countries) showed net income gains for wealthy countries but net income losses for the world's poorest countries ( Polaski, 2006 ). While the number of people living in extreme poverty (US $1.25 day − 1 ) has decreased since liberalized trade began its acceleration in the 1980s, the ‘rising tide’ of global economic growth has not lifted people very far with poverty at the US $2.50 day − 1 level increasing by almost the same number ( Chen and Ravallion, 2008 ). Expanding external trade has not been a powerful force for poverty reduction in developing countries.

There are three other ways in which trade liberalization and global market integration poses specific health risks: spread of disease, loss of government policy space and capacity, and increased labor market insecurity.

Spread of Disease

Infectious diseases such as the plague, smallpox, and cholera have long followed trade and military routes; it was a freighter's dumping of infected bilge waters that caused the Latin American cholera pandemic of the 1990s, and the deployment of UN Nepalese peace keepers that introduced cholera into Haiti in 2010. Trade has also been responsible for the movements of insect or animal species destructive to natural resources essential for health (food, water, and biomass). Modern transportation allows such pathogens and pests to spread faster and farther, with the severe acute respiratory syndrome outbreak in the early 2000s shaking public health systems out of their recent complacency. New International Health Regulations monitored by the World Health Organization (WHO) followed quickly, as did ongoing ‘pandemic preparedness’ within and between countries and the ‘securitization’ of health within global governance structures (the WHO and the UN), wherein pandemic disease is viewed as a risk to national and international security ( OUNHCHR, 2000 ). The global trade in fake medicines alongside the misuse of antibiotics in many countries, especially those that lack well-regulated public health systems, is heightening concern over the spread of multiple or extremely drug-resistant infections.

While increased research and policy attention is being paid to the globalization of infectious diseases, chronic noncommunicable diseases (NCDs) such as cancer, cardiovascular disease, and diabetes have been steadily growing in prevalence and now account for the largest proportion of the global burden of disease, outpacing infectious diseases in all developing countries except for those in sub-Saharan Africa. The rise in NCDs, particularly problematic in many low- and middle-income countries still coping with infectious epidemics, is partly attributable to international trade and investment policies that are globalizing ‘Western’ lifestyles, including increased consumption of unhealthy products. The nutrition transition in many of these countries toward a low-nutrient, high-energy diet is occurring much faster and at earlier stages of development than it did in high-income countries ( Popkin, 2009 ). Increased trade in tobacco and alcohol products, in turn, is associated with higher levels of consumption and health-related problems ( Labonté et al., 2011 ), at the same time that trade and investment treaties are being used by transnational companies (or governments on their behalf) to challenge public health restrictions on advertising, points of sale, taxation, and other measures now widely accepted as essential tools in health promotion.

Loss of Government Policy Space and Capacity

Another aspect of trade and investment liberalization with indirect health outcome is the loss of governments' ‘policy space’ and ‘policy capacity.’ ‘Policy space’ describes “the freedom, scope, and mechanisms that governments have to choose, design and implement public policies to fulfill their aims” ( Koivusalo et al., 2009 : p. 105). Policy capacity refers to the fiscal ability of states to enact those policies or regulations, which depends upon their ability to capture sufficient revenue through taxation for this purpose. The increasing ‘behind-the-border’ reach of an ever larger number of multilateral, regional, and bilateral trade and investment treaties is shrinking policy space by prohibiting a range of domestic regulatory options that could be used to promote more equitable population health outcomes. Although governments retain substantial policy flexibilities within existing trade treaties, these flexibilities continue to be eroded through ongoing negotiations, notably the shift to bilateral and regional treaty negotiations, which are often ‘WTO+,’ limiting policy space to a much greater extent than current WTO rules. Of particular concern is the proliferation of investor state dispute settlement provisions in bilateral and regional treaties, which allow corporations to sue governments for regulations that result in expropriation of their investments, with expropriation often defined in very broad terms. Anticipating the cost of such disputes can lead governments to choose not to exercise the health flexibilities that might still exist within these treaties: a ‘regulatory chill.’

Policy capacity, in turn, can be affected by liberalization's requirements for progressive reductions in tariffs. Many low- and middle-income countries rely much more upon tariffs for their tax revenue than do high-income nations. These tariff rates have come under intense trade negotiation pressures from high-income countries to be ‘locked in’ and rapidly reduced. In theory, governments should be able to shift their tax base from tariffs to sales or income taxes, assuming their economies grow with increased liberalization. In reality, most low- and middle-income countries subject to tariff reductions under structural adjustment loans from the IMF and WB were unable to do so ( Baunsgaard and Keen, 2010 ), partly the result of inadequate institutions to implement alternate tax regimes. For a majority of these countries, there was a net decline in overall public revenues – a loss in policy capacity – with implications for spending in health, education, or public regulations that can affect primary and secondary prevention of disease.

Turmoil in Labor Markets

At the same time that many countries saw their policy space and capacity erode under structural adjustment, a global reorganization of production was unfolding through the creation of ‘export processing zones’ (EPZs) in low- and middle-income countries. Industrial manufacturing previously centered in high-income countries began to outsource production to EPZs, which are tax-free and provide a low-paid and often minimally regulated workforce ( Martinez, 2004 ). Most of the world's trade no longer occurs between nations, but between multiple subsidiaries of transnational companies. Much of the value added (and the profit) is captured by the firm at the top of the chain, often in offshore financial centers (‘tax havens’), and often by way of relentless pressure on competing suppliers to bear most of the risk associated with investments in plant and equipment and to contain labor and other production costs. Corporations' ability to relocate production to lower cost jurisdictions limits the ability of workers to negotiate better wages and working conditions, and to expand social provision through the political process that was at the core of the postwar compromise between workers and capital in the high-income world. The result: ‘most workers are being squeezed’ ( Woodall, 2006 ). This is occurring in all countries of the world. Even those in low- and middle-income countries who have seen their incomes rise as a result of the growth in global production chains live in conditions variously described as ‘vulnerable’ or ‘precarious,’ where their employment is often informal, temporary, part-time, or generally lacking in adequate remuneration, security, or benefits ( Standing, 2011 ). Social protection programs can compensate, at least in part, for job and labor income losses that result from trade liberalization. However, given the extent of global market liberalization in capital, goods, and services, most of the world's governments find themselves converging on a policy model in which they strive to make their own geographic location as competitive as possible in international markets. Both labor market ‘flexibilization,’ with its stress-related health risks, and limits on the taxes that could finance improved health and social protection policies constitute important elements of competition state policies ( Schrecker and Labonté, 2011 ).

Globalization's New Health Challenges: Financial Crises and Austerity

In parallel with the globalization of the ‘real economy’ of production and consumption since the 1980s, a new form of capital accumulation arose in the rapid growth of a ‘financialized’ economy. Aided by new digital technologies, investors and financial institutions discovered that it was easier and faster to make money from money than lending it to the ‘real economy’ of production and consumption. The scale of this financialization is almost hard to imagine, with the value of outstanding derivatives in 2011 exceeding $700 trillion, or more than 10 times the total value of the world's gross domestic product. In late 2011, and despite the 2008 Global Financial Crisis (GFC), this daily arbitrage amounted to almost $5 trillion ( Bech, 2012 ).

The Great Financial Crisis

The proximate cause of the GFC was the collapse of the US housing market, leading to publicly financed trillion-dollar bailouts and countercyclical spending. Public deficits were created to cover the risks taken by private financiers, with one estimate of the total amount of public financing that went into the bank rescues among the G20 countries placing it at $11.7 trillion ( Ortiz and Cummins, 2012 ), several hundred billion of which was direct subsidies. Some of this amount has since been repaid or recovered through sale of government shares in quasinationalized failed banks, although not without large public losses. Less evident but more systemic is the interest rate spreads on what governments and their central banks provide to banks and what they then borrow back to cover this lending, leading to a massive transfer of public wealth to the very institutions and individuals responsible for the GFC ( Altvater and Mankopf, 2012 ).

The depth of global production chains meant that the GFC's credit crunch and subsequent Great Recession rippled rapidly across supply chains in low- and middle-income countries. While there is some worry that this will lead to a rise in extreme poverty (the greatest risk condition for disease) and increased child mortality, the most striking concern is a sharp rise in global unemployment, much of it concentrated among young adults, and creating a surplus (unemployed) labor pool of over 200 million ( ILO, 2013 ). The GFC also accelerated a longer standing trend in rising wealth and income inequalities within and between most nations of the world, notwithstanding some notable exceptions in South America. Although still subject to empirical contestation, such inequalities have been argued to pose a number of health and social risks ( Wilkinson and Pickett, 2009 ). While the GFC has negatively affected the pensions and savings of many of the world's middle and working classes, the 24 million whom investment banks refer to as ‘high- and ultrahigh-net-worth individuals’ saw their balance sheets decline for a year or two, before increasing by over 20% ( Baxter, 2011 ), a remarkable feat the pre-1929 oligarchs never accomplished. Billionaire wealth rose 20% alone in 2012 over 2011, in what Forbes described as ‘a very good year for billionaires’ ( Forbes, 2013 ).

The Austerity Agenda

After a brief period of stimulus spending by many of the world's high-income countries and those low- and middle-income countries that could afford it, most governments quickly signed on to ‘the austerity agenda’: a protracted period of state retrenchment argued as necessary to reduce government debt (much of it incurred to rescue failed banks) and to stimulate economic growth. The key tenets of austerity differ little from earlier structural adjustment ( Ortiz and Cummins, 2013 ). Unlike structural adjustment, the austerity agenda began in those high-income countries that were the epicenter of the GFC before becoming a more globalized set of policy prescriptions with fiscal contractions most severe in the developing world. Although there was little consensus among economists on the wisdom of pursuing austerity, the majority of IMF post-GFC loans pushed for elimination of food and fuel subsidies; wage bill cuts including salaries of education, health, and other public sector workers; rationalizing (reducing) safety net expenditures; and pension reform to delay eligibility. Several countries have been advised to reform their public health systems and increase labor market flexibilization, while many governments are attempting to generate revenue by broadening their consumption taxes to items disproportionately consumed by poor households ( Ortiz and Cummins, 2013 ).

The austerity agenda is expected to have mixed health impacts on populations in high-income countries, on the one hand potentially reducing discretionary expenditures on tobacco or excess alcohol consumption, but on the other hand increasing poverty rates for those in less secure employment settings; homelessness, particularly in the United States; and increased reliance on low-cost, highly processed obesogenic foods. Unemployment- and poverty/insecurity-related stress levels are also predicted to rise; and suicide rates since the crisis have increased by 12–15% in the worst affected European countries, at the same time that health and social protection financing has been dramatically cut back and user charges imposed on many services ( Stuckler and Basu, 2013 ). The health implications of austerity in low- and middle-income countries will likely follow that which accompanied earlier, regional financial crises: increased social stratification and inequalities; reduced food intake, health care utilization, and education expenditure; and increased morbidity and mortality, experienced first and worst by women, rural populations, and the poor.

A Deepening Neoliberalism

It is important to understand these recent globalization health risks as an extension of a 40-year uncontrolled experiment in neoliberal economic theory. From neoliberalism 1.0 (structural adjustment) to 2.0 (financialized economy) to 3.0 (austerity agenda), the rationale first proposed by Hayek – that the economy is too complex for government regulation and best left to an open, unfettered market with minimal state interference – has deepened and proved resilient even in the face of its failures. The present fiscal contraction of austerity is due, in no small measure, to decades of advice to developing countries by the international financial institutions (the IMF and WB) to keep taxes low to attract foreign investment, and tax cuts, notably among the high-income Anglo-American liberal economies and defended in the name of debt reduction and international competitiveness, that saw substantial declines the 1980s in marginal tax rates (paid by highest income earners) and corporate taxes, and increases in regressive consumption taxes. There would be no fiscal crisis and no need for austerity in most of the world's countries if progressive taxation had been retained. Even in those countries facing structural deficits, such as Greece, or reliant on aid transfers, such as many sub-Saharan African countries, liberalization of capital markets and global banking integration (including branches in all the world's tax havens) continue to allow companies and wealthy elites to avoid taxation almost altogether. The African continent has lost more wealth over the past 40 years in illicit capital flight, partly due to criminality and corruption but most of it involving commercial tax evasion, than it has received in foreign aid ( African Development Bank, 2013 ).

The two international institutions most implicated in the diffusion of neoliberal economics, the WB and the IMF, have begun to accept the empirical evidence of its shortcomings, calling for greater government caution in implementing austerity measures, partly in recognition of the ‘fiscal multiplier’ effect of government spending. In times of recession, public spending yields far more economic return to the ‘real economy’ of production and consumption (through purchasing and employment) than do tax cuts intended to spur private sector investments. Conservative estimates of this fiscal multiplier find that every dollar in public spending generates between 1.6 and 1.7 dollars in economic growth ( Stanford, 2013 ), with recent estimates of European public spending by sector showing much greater multiplier impacts for public investments in health, education, and environmental protection ( Reeves et al., 2013 ). The WB and IMF are also now cautioning against ‘extreme austerity’ and calling for higher taxation rates, especially for ‘ultrahigh-net-worth individuals.’ In 2012, the world's 1426 billionaires between them had as much wealth (USD 5.4 trillion) ( Forbes, 2013 ) as the entire continent of Africa (USD 2.3 trillion) and India (USD 3.2 trillion) ( Shorrocks et al., 2012 ). Given Africa's and India's 2011 combined population of 2.2 billion, this represents an inequality ratio of roughly 1 500 000:1.

Although this surge in private wealth has led to new philanthropies, some of them focused on global health issues, these are driven by individuals and their own ideas about how their wealth should be distributed, rather than through tax-funded, publicly representative, and accountable processes. A 2013 US review of econometric studies found that raising marginal tax rates from their present historic low of 35% to their previous high of 68% would have no statistically significant impact on factors driving economic growth, but would reduce poverty, inequality, and stimulate growth through public spending ( Fieldhouse, 2013 ). Similar findings exist for imposition of global taxation measures, such as a financial transaction tax that, by one study's estimate and if applied at a very low rate (.05%, or 5 cents on every 100 dollars) on every currency transaction, would generate over US $8 trillion in annual revenues ( McCulloch and Pacillo, 2011 ). Globalized capital calls for global systems of taxation, toward which some of the world's governments are now slowly turning their attention.

Simply stated, we do not have a problem of excess public debt. We have a problem of inadequate private taxation. We do not have a crisis of scarcity. We have a crisis of extreme inequality. These conditions and the health risks they pose are not ‘natural,’ but the result of policy choices for which there are alternatives.

Global Governance for Health

There is nothing inherently unhealthy in globalization as first defined: the growing interdependence of peoples across the world, through increased economic integration, cultural diffusion, and travel. It is the particular economic form of this interdependence – the ‘neo’liberalization of capital from the checks and balances that once existed when capital was confined within national borders – that is problematic, not only for public health. It has been argued for some time that the crisis facing contemporary globalization is that national governments and powerful elites have created binding and enforceable rules for a ‘free’ global economy without a global governance system capable of regulating that economy for a social purpose. That may be slowly changing.

Putting More Health in Trade

There is some evidence that WTO panels are increasingly accepting the importance and legitimacy of public health arguments in trade disputes, albeit only if there is no obvious trade discrimination involved. A 2010 case involving a tobacco dispute between Indonesia and the United States is illustrative. To comply with domestic legislation to prevent adolescent smoking, the United States banned imports of flavored cigarettes. Indonesia argued that the domestic legislation, by exempting ‘menthol’ from the list of flavors, discriminated against its clove cigarettes in favor of US-manufactured menthol cigarettes, which are the favored choice of American teens. This constituted a violation of WTO rules on national treatment (there should be no discrimination against ‘like’ imported goods). Indonesia further argued that there were ‘less-trade-restrictive’ ways (another WTO requirement) to meet the public health goal of reducing adolescent smoking than a ban on clove cigarette imports. The WTO dispute panel ruled with Indonesia on the first argument (nondiscrimination) but with the United States on the second (agreeing that a ban was a necessary public health policy). Provided there is no obvious discrimination, public health regulations appear to have growing latitude within (at least some) WTO ( McGrady, 2012 ). There is also greater public health attention being given to proposed trade and investment treaties, with efforts to ensure that before such treaties are finalized, public health concerns are given due consideration, and that ‘policy space’ for future public health regulation is assured, e.g., regarding trade or investment in food, alcohol, or other health-damaging commodities. The potential for a healthier governance of trade and investment treaties, however, remains constrained by the secrecy in which the treaties are negotiated, the privileging of business interests over public interests in informing government positions during negotiations, and the still-dominant assumption that liberalization is an inherently positive development for all countries involved. As argued, this is not a universally held or observed assumption.

Building Up the Social Protection Floor

In a different vein, the International Labor Organization is actively promoting a ‘Social Protection Floor Initiative’ to encourage countries to systematically build up their social protection systems. The argument for such an initiative is simple and compelling – social protection equitably redistributes wealth, opportunity, and health – and it is rooted in globally shared principles of social justice and human rights. It is supported by a large number of UN agencies, development banks, and government development agencies. There are glimmers of its implementation in different parts of the world: extended health coverage (now embraced by the WHO and the WB in the call for ‘universal health coverage’), social cash transfers, and public sector and rural employment guarantee schemes. The Initiative highlights the important role that a strong and strongly tax-supported social protection system can play in times of economic crises. Its implementation, however, rests on countries' willingness to increase rather than decrease progressive taxation (a race to the top, rather than to the bottom), and, in the case of many sub-Saharan African countries, an increase in the very low level of royalties or ‘rents’ charged to transnational extractive industries, and imposed during neoliberalism 1.0 as structural adjustment conditionalities ( OSISA, 2009 ). Finally, while the Social Protection Initiative offers countries good technical advice, it does not and cannot address the political will needed to implement such schemes.

Moving Health Higher Up the Foreign Policy Agenda

Efforts to create that political will can be found on two fronts: governmental initiatives to raise health higher in the foreign policy positions and negotiations of states, and the international campaigning of civil society organizations. Regarding the first, there have been several recent initiatives to improve foreign policy coherence for health. The Foreign Policy and Global Health initiative launched in 2006 by the foreign ministers of Brazil, France, Indonesia, Norway, Senegal, South Africa, and Thailand and renewed in 2011, as one example, encourages nations to broaden the scope of national foreign policies to integrate health concerns in a sustainable way and not as a crisis driven ‘one-off’ ( Ministers of Foreign Affairs, 2007 ). Resolution 63/33 ‘Global health and foreign policy’ adopted by the UN General Assembly in November 2008 further recognizes the “close relationship between foreign policy and global health and their interdependence” and urges “member States to consider health in the formulation of foreign policy” ( United Nations General Assembly, 2009 ). Several nations have pursued this aim through the development of coherent strategies ( Labonté and Gagnon, 2010 ) or efforts to create platforms for a ‘health-in-all-policies’ approach to their foreign affairs. Despite its recent global prominence, however, health is still not typically prioritized in the foreign policy agenda of most countries, and when it is, it is driven by traditional ‘high politics’ of security or economic risks due to pandemics or the spread of drug-resistant diseases. The continuing funding crisis of the WHO, and its reliance on extrabudgetary (nontithed) funding from governments and private sector donors for much of its operational budget, weakens its ability to provide leadership on global health governance initiatives that may go against the short-term interests of powerful nations or corporate actors ( Vaughan et al., 1996 ).

Supporting Civil Society Activism

Civil society activism, often aligned with organized labor movements, has been in the forefront of challenging the damaging social, environmental, and health impacts of neoliberal globalization. There have been some successes. The persistence of health activists in government and civil society moved tobacco control from indisputable evidence of smoking's harms to smoking restrictions, pricing measures, and other policies aimed at shifting cultural norms – always in conflict with tobacco transnational companies. South Africa's Treatment Action Campaign helped to break the impasse between new regimes of intellectual property rights and access to antiretroviral medicines, aligning with international groups mobilizing for a ‘just’ globalization and invoking international human rights treaties in their advocacy. A powerful network of ‘peasant’ organizations arose in Latin America in the 1990s, and has inspired similar mobilizations globally, linking together activism on agroecology, right livelihoods, food security, social protection, gender empowerment, indigenous rights, and environmental sustainability. In the same decade, a network of international civil society organizations defeated the Multilateral Agreement on Investments in 1998, an Organization for Economic Cooperation and Development (OECD) effort to further and more deeply liberalize cross-border capital flows than had been accomplished in WTO negotiations, although liberalized investment rules are increasingly being inserted into regional and bilateral trade treaties. Civil society activism demands persistence.

Conclusion: Accepting the Environmental Limits to Growth

While providing global health activists with a cautious optimism of the spirit, recent government and continued civil society activism in global health has yet to offer a sustained challenge to neoliberal globalization. Even if governments and activists succeed in curbing the predatory excesses of the financialized economy (neoliberalism 2.0), and exposing the inequitable and economically ineffective austerity agenda (neoliberalism 3.0), it will have to contend with ecological limits of returning to a pre-GFC ‘real economy’ of production and consumption. As the UK Commission on Sustainable Development noted in its 2009 study, “there is as yet no credible, socially just, ecologically sustainable scenario of continually growing incomes for a world of nine billion people” ( Jackson, 2009 ). Indeed, the two sectors that are most driving climate change are energy production/consumption and transportation – the two activities central to our globalized economy.

Borrowing from an earlier study on the social dimensions of globalization, the Globalization Knowledge Network of the 2008 WHO Commission on Social Determinants of Health concluded that an equitable global health would only be secured under the ‘three R's’: systematic resource redistribution between countries and within regions and countries to enable poorer countries to meet human needs, effective supranational regulation to ensure that there is a social purpose in the global economy, and enforceable social rights that enable citizens and residents to seek legal redress ( Labonté et al., 2007 ).

Comparative Health Systems; Ecology and Health; Environmental Stress and Health; Migration and Health; Social Epidemiology; Social Exclusion, Social Deprivation and Health; Socioeconomic Status and Health; Urban Life and Health.

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ORIGINAL RESEARCH article

The impacts of globalization on inequality in the post-covid-19 world: evidence from china.

• 1 Department of Economics and Finance, The Hang Seng University of Hong Kong, Hong Kong SAR, China
• 2 Department of Economics, The University of Western Australia, Perth, WA, Australia
• 3 School of Financial Management, Hainan College of Economics and Business, Hainan, China

Empirical studies suggest that globalization (FDI and international trade) has been greatly affected by the COVID-19 and related anti-pandemic measures imposed by governments worldwide. This paper investigates the impact of globalization on intra-provincial income inequality in China and the data is based on the county level. The findings reveal that FDI is negatively associated with intra-provincial inequality, intra-provincial inequality increases as the primary industry sector (agriculture) declines. The result also finds that the increase in inequality stems not from the development in the tertiary or secondary industry sectors per se, but the unevenness in the distribution of these sectors.

Introduction

Since opening and economic reforms in 1978 Chinese GDP (GDP per capita) experienced a period of unprecedented growth, increasing from 367.9 billion Yuan (385 Yuan) in 1978 to over 90 trillion Yuan (64,644 Yuan) in 2018 1 . During the same period, over 850 million Chinese were lifted out of poverty ( 1 ). Many attribute this impressive achievement to the successful implementation of globalization in the reforms [e.g., ( 2 – 6 )].

However, income inequality in China escalated in unison with the reduction in aggregate poverty levels. Thus, Chinese policymakers tried to combat income inequality. Against this backdrop, after 7 years of a moderate decline (from 2008 to 2015), income inequality has been on the rise ( 7 ). The increase in inequality at different spatial levels questions the benefits of globalization. Therefore, it is of interest to investigate if globalization is responsible for the increase in intra-provincial (county-level) inequality in China 2 .

According to the Asian Development Bank ( 8 ), spatial inequality accounted for 54% of China's income inequality in 2007. Cheong and Wu ( 9 ) show that intra-provincial regional inequality in China grew substantially between 1997 and 2007. Regrettably, most of the studies on China's income inequality focus on national [e.g., ( 10 , 11 )] or inter-provincial level [e.g., ( 12 , 13 )]. To the best of our knowledge, there is no study examining the association between globalization and county-level intra-provincial regional inequalities in Chinese provinces. Thus, the above studies and their findings remain impractical for the Chinese policymakers tackling regional inequality amongst counties and county-level cities within each province.

This paper contributes to the literature by studying the impacts of globalization on intra-provincial regional inequality in China from 1997 to 2007. Our findings might help to derive pragmatic and efficient policies mitigating regional inequality within Chinese provinces. Moreover, the results contribute to the ongoing scholarly debate [e.g., ( 13 – 15 )] as to whether the link between globalization and inequality is justified. Our findings suggest that FDI negatively affects intra-provincial inequality. Furthermore, we find that industrialization and development of the secondary industry sector (manufacturing and construction) and the tertiary industry sector (services) are positively associated with regional income inequality in China. Moreover, the results suggest that the transportation infrastructure decreases intra-provincial inequality.

Empirical ( 16 – 18 ) and anecdotal evidence suggests that globalization (FDI and international trade) has been greatly affected by the COVID-19 and related anti-pandemic measures (e.g., quarantines, lockdowns, and social distancing) imposed by the governments worldwide. Furthermore, COVID-19 in conjunction with the ongoing US-Sino trade war poses an unprecedented threat to China's social and economic prosperity. In particular, high-income inequality in pre-pandemic China documented at various spatial levels ( 9 , 19 , 20 ) might become more acute in the short- and long-run post-pandemic perspective. For instance, COVID-19 related closures and lockdowns have a larger knock-on effect on jobs and incomes of the lower-income, less-educated households from poor regions who are less likely to work remotely and unable to relocate to the rich regions ( 21 – 24 ). On the other hand, lower-income people who were allowed to commute to work were more likely to be infected with COVID-19 while less likely to receive adequate healthcare provision than high-income patients ( 25 ). On top of that, unlike many governments in developed economies (e.g., the U.S., the U.K., Germany), Chinese governments did not offer cash support to the affected vulnerable households.

While the above-listed factors can be considered as mainly short-term, COVID-19 might also affect the labor market and income disparity in the long-term due to a persistent increase in the online and teleworking sector requiring IT skills and access to technology. This, in turn, works to the advantage of a better-educated labor force from richer regions [e.g., ( 26 )]. Moreover, social distancing measures brought prolonged closures of schools and distance/online learning. Such arrangements are expected to have a disproportionately large negative effect on the education of pupils from low-income families, and thus their future employment opportunities ( 27 ). Summing up, empirical and anecdotal evidence suggests that COVID-19 hampered globalization but increased poverty and income inequality globally and in China. While it is still too early for empirical research examining the long-lasting effect of COVID-19 on the association between globalization and regional income inequality in China, our study documents such association in earlier years and thus constitutes an important reference for the post-COVID-19 studies.

The remainder of this paper is structured as follows. Section Literature Review presents a review of the literature. Section Methodology delivers the discussions of the econometric model and introduces the data. Section Results and Discussions presents the results and interpretations, while Section Robustness Tests delivers and discusses robustness tests. Section Conclusions concludes the paper and offers policy recommendations.

Literature Review

Foreign direct investment (FDI) and international trade are the most common proxies of globalization. According to NBSC ( 7 ), inward FDI in China increased enormously from US$1.96 billion in 1985 to US$135 billion in 2018. The positive impact of FDI on economic growth can be linked with the efficiency spillovers to domestic firms [e.g., ( 28 , 29 )]. Furthermore, FDI can bring in new products and managerial technologies as well as advanced organizational arrangements. Many cross-country studies suggest that FDI boosts economic growth [e.g., ( 30 , 31 )]. Focusing on China, Tian et al. ( 5 ) find that the provinces with a high FDI ratio experience faster technology updating and higher economic growth. In tandem with inward FDI, Chinese international trade surged from US$20.6 billion in 1978 to US$4.62 trillion in 2018 ( 7 ). Numerous studies show that international trade exerts a positive impact on economic growth in China [e.g., ( 2 – 4 , 6 )].

Against this backdrop, the Chinese government established preferential policies to boost FDI and international trade. For instance, special-economic zones (e.g., Shenzhen), open cities, preferential exchange rates, and taxes all aim to attract foreign investors and promote international trade ( 32 ). However, it is argued that globalization could be harmful in developing countries [see ( 33 , 34 )]. Based on a sample of 1,254 empirical results from 123 peer-reviewed studies, Heimberger ( 15 ) documents a moderately positive effect of globalization on inequality in developing countries.

With regards to China, many studies report that FDI spurs inequality ( 35 – 37 ). Furthermore, FDI can exert different impacts on growth across regions. Tian et al. ( 38 ) document that the productivity of Chinese firms in the peripheral inland region is adversely affected by the FDI flowing into coastal regions. They argue that FDI is positively associated with regional inequality in China. Huang and Wei ( 19 ) and Zhang et al. ( 20 ) find that FDI contributes to income inequality and the formation of convergence clubs across prefectural-level Chinese cities. On the contrary, Ma and Jia ( 39 ) document a positive association between FDI and regional income convergence.

Another major component of globalization: international trade is reported by some as a major force behind the growing disparity between the inland and coastal regions [e.g., ( 40 , 41 )]. Furthermore, Zhang and Zhang ( 35 ), Gries and Redlin ( 42 ), and Wang and Chen ( 43 ) find that regional inequality in China increases with exposure to international trade. However, in a study on international trade and rural-urban inequality in Chinese prefectural-level cities, Wei and Wu ( 44 ) document that trade openness significantly reduces inequality. Additionally, some researchers report no effect of international trade on regional inequality [e.g., ( 13 , 45 )].

In summary, the common consensus is that globalization brought about by FDI can increase the output of a region. However, the effect is bi-directional. On the one hand, inequality is reduced if FDI is accurately directed at the poor and underdeveloped regions. On the other hand, inequality increases if globalization further reinforces the economic growth of the already globalized regions. Moreover, both facets of globalization (FDI and international trade) are found to exert different impacts on economic growth across the regions. This, in turn, exacerbates regional inequality in China. Importantly, most of the studies on China use provincial-level data, while the impacts of globalization on intra-provincial regional inequality remain largely unexplored by the academic community 3 .

Methodology

Econometric specification.

To examine the determinants of regional income inequality at the county-level in China, the regression approach is used with a baseline model presented in equation (1) below.

where GINI i, t is the Gini coefficient for province i at time t , X i, t is the matrix for the provincial characteristics, β k is the k x 1 vector of the coefficients on X i, t , φ i represents the fixed effects for province i , v t is the set of time dummy variables. ε i, t is the idiosyncratic disturbance term, uncorrelated across the provinces.

The results presented in this study are based on the generalized method of moments (GMM) estimator developed by Arellano and Bond ( 46 ) and Blundell and Bond ( 47 ). GMM is recognized as successful in handling endogeneity [e.g., ( 48 , 49 )]. The endogeneity is especially common in studies on income inequality, as the problems of simultaneity, unobserved heterogeneity, reverse causality, and omitted variables may all contribute to it ( 13 , 50 ). One example is government expenditure supporting underdeveloped regions. It can be expected that higher expenditure will lead to a reduction in income inequality (the dependent variable). However, higher inequality may also lead to higher expenditure (the explanatory variable).

GMM estimator can overcome the endogeneity problem, control for fixed effects and time effects. Furthermore, it is recommended for unbalanced panel data with multiple endogenous variables ( 48 , 51 ). Thus, the GMM estimator is often employed in the recent empirical literature on income inequality [e.g., ( 13 , 45 , 52 )]. We employ the two-step system GMM (2S-SGMM) estimator by Blundell and Bond ( 47 ) which is asymptotically efficient and robust to any pattern of cross-correlation and heteroskedasticity ( 52 ).

Furthermore, to mitigate the problem of potentially downward-biased standard errors, in all specifications, we use small-sample corrected standard errors ( 53 ). Besides, because the panel dataset is unbalanced, the transformation of orthogonal deviations is used to minimize the number of gaps in the transformed equations ( 52 ). Moreover, all explanatory variables are treated as endogenous. To combat the problem of instrument proliferation ( 51 , 52 ), the instruments are combined into smaller sets by collapsing blocks in the instrument matrix. Additionally, we use “ collapsed ” instruments.

Data Sources and Explanations of Variables

Intra-provincial regional inequality amongst the counties and county-level cities (measured by the Gini coefficient) is the dependent variable. The Gini coefficient ranges from zero to 100, with zero (100) representing perfect income equality (inequality). In the baseline model ( Table 2 in Section Results and Discussions), we employ a set of 11 explanatory variables based on provincial characteristics 4 . All the provinces and autonomous regions in China are included in this study 5 . The dataset is an unbalanced panel covering the 1997–2007 period and the dataset is from Cheong and Wu ( 50 ). There is no previous research focused on the intra-provincial data and it is the first paper to apply the intra-provincial data to investigate the relationship between globalization and inequality. In addition, China's international trade was booming during that period and it is worth examining the relationship between globalization and inequality for that period. Explanatory variables are compiled from China Statistical Yearbook and augmented with data from China Statistical Yearbook for Regional Economy and Provincial Yearbook ( 7 ). When appropriate, data series have been adjusted for inflation by converting them to 1997 constant prices using provincial consumer price index (CPI) as the deflator.

Based on prior empirical research [e.g., ( 37 , 43 )] we use the FDI and a combined value of exports and imports ( XIM ) as explanatory variables proxying for the effects of globalization on intra-provincial inequality. Both variables are expressed as a share of provincial gross regional product (GRP). Furthermore, we control for the potential effect of domestic trade ( DOMTR ) measured as the ratio of retail sales to provincial GRP.

The share of the tertiary (secondary) industry outputs in Chinese national GDP changed from 43.0 (46.9%) in 2010 to 52.2% (40.7%) in 2018 ( 7 ). This means that especially the development of the tertiary industry sector has been fast in recent years 6 , which, in turn, may affect regional income inequality. Some studies find that Chinese industrialization led to a surge in inequality ( 40 , 54 ) and the formation of income convergence clubs ( 20 ). Therefore, we control for the potential effects of the secondary ( SECIND ) and tertiary ( TERIND ) industry sectors on income inequality.

GDP and GRP per capita are routinely employed as a determinant of income inequality in cross-country [e.g., ( 14 , 55 , 56 )] and China-focused studies [e.g., ( 10 , 13 )]. Thus, we include the real GRP per capita ( GRPPC ) 7 explanatory variable in the model of regional inequality.

Chen and Groenewold ( 57 ) and Fan et al. ( 58 ) document a positive impact of transportation infrastructure on regional development in China, while Gries and Redlin ( 42 ) find that transportation aggravates inequality. However, the above studies are based on provincial-level data. We examine the impact of transportation infrastructure ( TRANSP ) on intra-provincial inequality 8 . Lau ( 6 ) shows that high inflation is detrimental to economic growth, while many studies suggest that there is a positive association between income inequality and inflation [e.g., ( 13 , 60 )]. Following prior studies, we include the INLF term in our models.

Wan ( 61 ) states that the effects of fiscal transfers on inequality are generally negligible and sometimes negative at the provincial level. Fang and Rizzo ( 62 ) claim that government transfers are ineffective in inequality reduction in rural China. On the contrary, Zhuang and Li ( 63 ) and Jain-Chandra et al. ( 10 ) argue for an important role of fiscal transfers in reducing inequality. However, the association between government expenditure and intra-provincial inequality has not been studied. Given the above, we employ the GOVEX term calculated as a ratio of government expenditure supporting underdeveloped areas to provincial GRP. Another variable ( ECOSIG ) is the share of provincial GRP to national GDP. We use the ECOSIG term to test the association between the relative provincial output and intra-provincial inequality.

Shindo ( 64 ) concludes that education subsidies in the eastern, coastal province of Liaoning and Jiangsu boost economic growth and welfare. However, he also argues that due to “large differences in productivity between the regions, the growth gap widens with evenly raised education subsidy rates.” (p. 1061). Prior studies suggest that the income disparity can be largely explained by educational levels [e.g., ( 10 , 65 )]. We investigate the impact of education on intra-provincial inequality by including the ratio of educational funding in each province to provincial GRP ( EDUFND ) in our baseline model.

Descriptive Statistics

Figure 1 presents the plot of Gini coefficients for China from 1981 to 2018. Overall, inequality has been on the rise, except for three periods of decline: 1981–1983, 1994–1996, and 2008–2015. Furthermore, in 2008 a Gini coefficient peaked by reaching a value of 0.491. Figure 1 also indicates that income inequality increased moderately from 0.462 to 0.468 during the most recent 3 years. Moreover, comparing the Gini coefficient for 1981 and 2018, it has grown by over 50%. Overall, Figure 1 questions the effectiveness of policymakers' efforts to combat China's high and persistent inequalities.

Figure 1 . Income inequality in China from 1981 to 2018 measured by Gini coefficients. Source: Ravallion and Chen ( 32 ) and NBSC ( 7 ).

Looking at Table 1 , we can observe that the regional inequality for Chinese provinces between 1997 and 2007 ranges from 0.141 to 0.469, while the dispersion of GINI (coefficient of variation CV) equals 0.254. This means that the standard deviation accounted for around 25% of the GINI's mean value. Summing up, there are substantial disparities in the sample's intra-provincial income inequality.

Table 1 . Descriptive statistics.

Results and Discussions

The correlation between two measures of globalization (FDI and international trade) and intra-provincial regional inequality can be observed in Figures 2 , 3 . The scatterplot and the line of best fit shown in Figure 2 (3), suggest that regional inequality is somewhat negatively (positively) correlated with FDI (international trade). These observations suggest that although FDI and international trade are major components of globalization, they have potentially different effects on Chinese intra-provincial regional inequality.

Figure 2 . Intra-provincial regional inequality (GINI variable) and the ratio of FDI to provincial GRP (FDI variable).

Figure 3 . Intra-provincial regional inequality (GINI variable) and the ratio of the total value of imports and exports to provincial GRP (EXIM variable).

Empirical results corresponding to equation (1) shown in Table 2 are based on the 2S-SGMM estimator 9 , 10 . Sargan and Hansen tests suggest that the instruments are valid, while the AR (2) test indicates the absence of the second-order autocorrelation in differenced residuals Δε i, t in the transformed equation, i.e., the 2S-SGMM estimator is correctly specified.

Table 2 . Regional inequality and globalization.

The estimated coefficient on FDI (-3.526) is statistically significant at the 5% level and negative which indicates that FDI can alleviate intra-provincial inequality. Given the sample average value of FDI (0.013) and GINI variable (0.283), we can expect that a 10% increase in FDI to provincial GRP ratio brings about a 0.016 decrease in intra-provincial inequality (measured by GINI coefficient), ceteris paribus 11 . The result corroborates the findings of Gries and Redlin ( 42 ), and Ma and Jia ( 39 ). However, our finding differs from studies based on inter-provincial data [e.g., ( 35 , 37 )] and prefectural-level cities data ( 19 ) documenting that FDI increases inequality.

Mixed findings at different spatial levels are reported in studies on international trade. Many studies based on provincial-level data show that trade increases inequality [e.g., ( 35 , 40 , 43 )]. However, Wei and Wu ( 44 ) reach the opposite conclusion using prefectural- and municipality-level data. Hence, our results pinpoint that policy formulation at the county-level should not be based on research carried out at the provincial- or prefectural-level, and vice versa. Furthermore, research on regional inequality should be carried out at various spatial levels.

Table 2 shows that the proportion of retail sales of consumer goods to provincial GRP ( DOMTR ) is negatively associated with regional inequality. The DOMTR variable refers to the sum of retail sales of commodities sold by wholesale and retail trades, catering services, publishing, post and telecommunications, and other services to urban and rural households' consumption and social institutions' public consumption. It might be, that as most of these services do not require highly skilled labor, the expansion of these sectors can absorb the surplus of unskilled labor. Consequently, the backward regions within a province can enter these services easily, which, in turn, improves the living standards of poor regions. In other words, our findings suggest that the promotion of domestic trade in the underdeveloped regions can increase their outputs, and thus alleviate intra-provincial inequality.

The statistically significant and positive estimated coefficient on SECIND and TERIND terms imply that inequality increases with the decline of agriculture (primary industry sector). Given the sample mean value of SECIND (0.450) and TERIND (0.369), we can expect that a 1% increase in a share of the secondary (tertiary) sector in provincial GRP brings is associated with a rise of 0.011 (0.013) in regional inequality, holding all else constant. This finding agrees with other studies [e.g., ( 32 , 57 , 62 , 65 )]. The returns of the secondary and tertiary industry sectors are higher than that of the primary industry sector. Therefore, coupled with the documented uneven distribution of industrialization and development across the regions, an expansion of these sectors can increase intra-provincial regional inequality.

Table 2 shows that the estimated coefficient of GRPPC is statistically significant and positive, which is in line with e.g., Xiong ( 13 ). This implies that the inequality levels in rich provinces are higher than those in poor provinces. Our results suggest that, when governments formulate a policy for inequality alleviation, they should focus on the poor and the rich provinces alike. This also calls for the design of a comprehensive intra-provincial map of China and a coherent strategy combating inequality in all the provinces.

The estimated coefficient on the TRANSP variable is positive and statistically significant at the 5% level. This is consistent with e.g., Gries and Redlin ( 42 ). The regions with agglomerated industries tend to be richer and have higher tax revenues, thus can finance new infrastructure, which, in turn, attracts more industries. This circularity can lead to a further increase in regional inequality. Therefore, our findings are important and call for a concerted strategy of equalizing access for all the regions. In other words, the governments should provide better access for the poor regions by improving their transportation infrastructure.

It is often suggested that income inequality and inflation are positively associated ( 13 , 60 ). Contrary to these expectations, Table 2 shows that inflation is negatively associated with regional inequality. One reason we can think is that inflation has a much greater impact on regions relying on secondary and tertiary industries than those relying on primary industries. Thus, the population in the urban (industrialized) areas might be experiencing larger reductions in their real incomes due to an increase in e.g., food prices. Therefore, richer county-level units with a high level of urbanization, become poorer in real terms, while the county-level units with a low level of urbanization (agrarian-oriented) are less affected and remain similarly low levels of income. Hence, inflation's equalizing side-effect on intra-provincial income distribution.

Robustness Tests

We test if the results are robust to different proxies and specifications. OECD ( 67 ) suggests the use of exports only, without the value of imports, in assessing the degree of globalization. Therefore, we use the proportion of the total value of exports to provincial GRP ( EX variable). Besides, because GRPPC and ECOSIG variables are similar in their construct, we check if the results remain robust if one of them is removed from the model. Consequently, column (1) and column (2) in Table 3 lacks the GRPPC and the ECOSIG term, respectively. Moreover, Column (3) shows the results from the specification with both GRPPC and ECOSIG terms.

Table 3 . Robustness tests for regional inequality and globalization.

Column (1) in Table 3 shows that the coefficient on the EX variable (unlike on EXIM term in Table 2 ) is statistically significant and has a positive sign. Furthermore, coefficients on SECIND and TERIND ( FDI and INFL ) terms are statistically significant, positive (negative), and carry similar magnitudes as their equivalents in Table 2 . Column (2) and (3) shows that the coefficients on GRPPC ( DOMTR ) gain statistical significance at the 5% level and carries a positive (negative) sign. In summary, the robustness tests show that the variables of FDI, SECIND, TERIND , and TRANSP ( INLF ) retain statistical significance in all (two out of three) specifications. Therefore, we can conclude that overall, the results are robust.

The XIM term from models in Tables 2 , 3 is based on the proportion of provincial GRP. In Table 4 , we test whether the results are robust to the effects of international trade based on a per capita basis: the total value of exports and imports per capita ( EXIMPC ) and exports per capita ( EXPC ). To test the robustness of the effects of education on intra-provincial inequality we use two alternative proxies for education: the number of secondary school enrolments ( EDUENR ), and secondary school graduates ( EDUGRA ) as a share of the provincial population. The estimated results are shown in Table 4 which shows that all three proxies of education ( EDUFND, EDUENR , and EDUGRA ) are statistically insignificant. Therefore, there is not enough evidence that education plays a major role in intra-provincial inequality in China. The coefficients on EXIMPC and EXPC are also insignificant. However, the coefficients on FDI, SECIND , and TRANSP ( TERIND, GRPPC , and INFL ) retain their significance, direction, and have a consistent magnitude in all (two out of three) specifications.

Table 4 . Robustness test (ii) for regional inequality and globalization.

Conclusions

This paper investigates the impact of globalization on intra-provincial income inequality in China during the 1997–2007 period. Unlike most prior studies based on inter-provincial data, our findings are based on county-level data. Therefore, this study pinpoints the importance of studying regional inequality at different spatial levels, as the necessary precondition to formulate pragmatic and effective policies. The results indicate that FDI is negatively associated with intra-provincial inequality, whereas international trade does not seem to have a significant effect. The COVID-19 has significantly affected the FDI and globalization, most of the countries were shut down the border and this would enlarge the inequality in China. However, the FDI would increase after COVID-19 and we proposes the following policy implications. First, FDI should be encouraged by the government, especially in poor regions. Second, more preferential administrative policies, tax incentives, and improved transportation infrastructure should be provided to the underdeveloped regions, to enable easier access and to attract more FDI.

We also document that intra-provincial inequality increases as the primary industry sector (agriculture) declines. This suggests that the Chinese government can reduce regional inequality by stimulating growth in the primary industry sector as suggested by e.g., Ravallion and Chen ( 32 ) and Chen and Groenewold ( 57 ). However, it would be inappropriate to restrict the development of the secondary and tertiary industry sectors in redressing inequality because the development in these sectors can greatly reduce the poverty at the aggregate level. Moreover, restricting the development of the above sectors can make the population in the poor regions worse-off, even if intra-provincial inequality is reduced. In other words, the increase in inequality stems not from the development in the tertiary or secondary industry sectors per se, but the unevenness in the distribution of these sectors. Therefore, the policymakers should not abandon globalization, industrialization, and development in secondary and tertiary industries, but instead, direct them toward disadvantaged regions and ensure that they benefit the poor, i.e., spread far into the poor regions within a particular province.

Data Availability Statement

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

Author Contributions

TC: conceptualization, data curation, methodology, visualization, writing—original draft preparation, and writing—review and editing. YW: conceptualization, data curation, methodology, software, visualization, writing—original draft preparation, and writing—review and editing. MW: data curation, methodology, software, visualization, writing—original draft preparation, and writing—review and editing. NM: data curation, methodology, visualization, writing—original draft preparation, and writing—review and editing. All authors contributed to the article and approved the submitted version.

This work was supported by the Hainan College of Economics and Business (Project Reference Number: hnjmk2021301).

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher's Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

1. ^ According to the National Bureau of Statistics of China (thereafter NBSC).

2. ^ The word ‘globalization' could mean different things. In this study we refer to economic globalization measured by the scope of foreign direct investment (FDI) and international trade (imports and exports).

3. ^ The noticeable exceptions are studies based on prefectural-level regional data conducted by Wei and Wu ( 44 ), Huang and Wei ( 19 ), and Zhang et al. ( 20 ) who examined income inequalities amongst prefectural-level Chinese cities.

4. ^ For the list of all the variables and their definitions see Table A1 in the Appendix.

5. ^ We exclude four municipalities: Beijing, Tianjin, Shanghai and Chongqing because the majority of their administrative regions are districts, not counties or county-level cities.

6. ^ China's GDP composes of three broad sectors: primary industry (mainly agriculture), secondary industry (manufacturing and construction) and tertiary industry (services).

7. ^ The regional inequality indicator ( GINI ) used in this study refers to the inequality amongst the cities and counties within a province excluding the districts. Therefore, for the sake of consistency, the GRPPC factor for each province is also based on data from all the cities and counties in that province, while excluding the districts.

8. ^ To handle the problem of unequal capacities (volumes of transport per mile) in three major modes of transportation, i.e., highways, railways, and waterways, we follow the approach used by Yao and Wei ( 59 ). That is, we convert railways (waterways) into equivalent highways using the conversion ratio of 4.27 (1.06).

9. ^ All the data series were tested for the presence of unit root using the Fisher ADF and Fisher PP test. Most of the data series fail both tests which constitutes another argument for using 2S-SGMM estimator.

10. ^ Untabulated estimated results from ordinary least squares (OLS), fixed effects (FE), random effects (RE), and two-way fixed effects are used as a robustness measure. Most of the untabulated estimated coefficients have similar statistical significance and signs to those in Table 2 . Therefore, our estimated results are fairly robust.

11. ^ Following e.g., Firth et al. ( 66 ), this result is calculated as follows: 0.013 * 0.1 * -3.526/0.283.

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Table A1 . Variables used in the baseline model (presented in Table 2 ).

Keywords: county level, globalization, inequality, COVID-19, China

JEL classifications: C5, F6, R11

Citation: Cheong TS, Wu Y, Wojewodzki M and Ma N (2021) The Impacts of Globalization on Inequality in the Post-COVID-19 World: Evidence From China. Front. Public Health 9:790312. doi: 10.3389/fpubh.2021.790312

Received: 06 October 2021; Accepted: 01 November 2021; Published: 29 November 2021.

Reviewed by:

Copyright © 2021 Cheong, Wu, Wojewodzki and Ma. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Ning Ma, china_ma_ning@hotmail.com

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.

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Positive and negative effects of globalization Nistor Cornelia

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Nowadays globalization is a debatable topic regarding the economic growth of the developing countries around the world. This paper tries to determine the aspects associated with this argument and explains the effects of globalization in the developing countries in three important and co-related fields i.e. economic and trade processes, education and health systems and culture on the basis of some of the scholars' arguments expressed on the subject. In the recent past, there have been the pros and cons of globalization in developing countries. Some argue that globalization is indeed a curse to the developing countries as it can neither be rejected nor fully be applied to its national policy. However, many others suggest that globalization should be looked at in all its manifestations and from different angles it is a blessing for those countries. In order to address this issue, when considered from the economic perspective, the negative economic impacts of globalization should be minimized and exportable capacity of the developing countries' economy in the global market should be maximized in a gradual manner. In practice the study will give the practitioners and the relevant part the knowledge to improve business in developing countries. IJSB

Recent years have had many changes and shifts, one of the largest shifts was towards Globalization. Globalization is the process of economies shifting into the global market. It has the concepts of Comparative and absolute advantage to its support. However with the specialization of labor and technological advancements, globalization has been adopted by many countries alike. This adaptation had not been analyzed, but with the recent events that unfold economically, scholars and economists have started to question the traditional beliefs and theories of globalization. Also as to how do globalization affects the world? The question has been sought to be answered by many modern economists such as the likes of Stieglitz and so forth. Many economists still defend globalization, and the contrary raises questions on the developing or the under developed countries, countries like Uganda or Ethiopia have shown growth and developments but it has been of little significance. The other aspect of the critiques on globalization is that it helps not only the elite but imposes a corporate culture that is trying to be universalized. Organizations that are operating on the global scale such as the IMF or World Bank have policies that imposes its own rights in other economies by persuading them to shift to free liberalized economies. However there are arguments supporting globalization as well as to how a global culture reduces violence and paves way for cultural and ethnic tolerance, allows countries to specialize and etc. Moreover as to whether there is no link between corruption and market system or developmental failure, and that the globalization itself does not have flaws but the way it is implanted is flawed. Such is the case of Globalization as it affects socio-political, ethnic and cultural values and much more. All these aspects are taken into detailed consideration and the discussion is formed

Globalization is a phenomenon with a great impact on all economic, social, political, and characteristic of the last decades of the twentieth century. It is a new reality. Globalization is the development beyond market and the global economy and it means "world without borders”. Globalization can not be treated as a phenomenon which has a fixed starting point and there is no any precise definition. The unequal distribution of natural resources led to all countries of the world to be increasingly interdependent on products and services offered by other countries which they themselves do not possess and therefore can not produce. This urged to a greater mobility of people from one country to another and it led to a cultural interweaving. A very important role in the globalization of countries play also the immigrants who contribute not only to the economic level of their host countries but also the respective countries they come from. And the word "globalization" does n...

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Nadia Lahdili

Globalization is a dominant aspect of the modern world system, and it constitutes one of the most powerful forces in determining the future course of the planet. It has various dimensions: economic, social, political, cultural, security, environmental, and many more. The focus of this paper will be on the concept of "globalization" as applied to the world economy. This concept has different interpretations by different schools of thought. Consequently, there are contrasted reactions vis-à-vis globalization, with some seeing it as a serious menace to the world economic system while others praise it as salvation for the world economy. There are three aims for this paper. First, it will clarify the notion of "globalization". Second, it will evaluate the benefits and the adverse effects stemming from globalization according to surveys and literature reviews. Third, it will consider how the cost and dangers incurred from globalization could be offset through wider international cooperation and the establishment of new global institutions. The question at hand here-hinted from the title of this study-, is that there are both positive and negative facets of globalization. Some of its positive features are thanks to the competition that it stirs up between developed and underdeveloped countries. Some of the negative aspects that could potentially lead to conflicts could be mitigated by global cooperation through relaxed policies in favor of the inferior party, or the enacting of new binding laws and statutory bodies. Thus, while globalization can be a trigger of international discords, it can also contribute to their containment.

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The world in the past was confined to a nation, a community or a village. This made it so difficult interacting with the people who were some distance away. However changes that have particularly been brought about by the advancing technology have transformed the world into what was never imagined before; a small village that can be travelled in just a few moment. This paper seeks to explain the negative and positive impact of globalization through extensive research. The findings indicate that economic sustainability is at the epicenter of the positive impact of globalization. Countries can share production factors and multinationals can open branches anywhere they deem fit. Globalization has also increased the variety for consumers and created more market opportunities for producers. At the socio-economic front, globalization has enhanced cultural interaction thereby fostering tolerance. However, globalization has its own limitations. First on the list is the monopoly of big multinationals especially in developing countries. Globalization has also led to an increase in the spread of communicable diseases such as H1N1 and the Middle East Respiratory Syndrome.

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Globalization: Positive and Negative Effects Essay

Globalization signifies increasing economic and cultural integrations between different states. It is one of the primary features of modern world economy and society, built on countries’ interdependency and unity of values of diverse nations. Globalization can be illustrated, for instance, by dollarization and global demand for McDonald’s products. Therefore, in my opinion, to date, globalization can be characterized by the interchange of products, knowledge, and technical achievements between various states, striving for standardization of economy and law, and the development of foreign commerce.

Positive and Negative Effects

Although the term “globalization” appeared several decades ago, there is still no ambiguous attitude to this phenomenon. On the one hand, globalization contributes to strengthening the world economy, appropriate resources allocation, the interaction between different countries, and the development of lagging countries due to access to up-to-date technology. On the other hand, there is a risk that it causes unemployment, overpopulation, climate injustice. In addition, its potential negative aspects include the states’ fear of losing sovereignty and traditions due to orientation toward the global interests and culture. Thus, globalization has merits and demerits that provide it with admirers and opponents.

Counteraction to Its Negative Aspects

Globalization can be more effective and bring more positive results if people counteract its negative aspects.

Overpopulation: First of all, I can recommend preparing for population growth: people can develop social protection institutions and labor marketing. Secondly, it is possible to improve the educational system and update the unemployment insurance: it will contribute to decreasing the level of unemployment.

Global Issues: It would be helpful to support small and medium businesses and lagging countries because orienting toward the world economy causes a risk to develop only large organizations and prospering states. In addition, each country should maintain the patriotic spirit of its population and does not allow global tendencies to replace their traditions.

Climate Injustice: It is necessary to focus more on climate change and the environmental state. For instance, people can develop the technology and investment in this sphere to improve the technological capacity and make them more ecologically friendly.

Therefore, globalization is a significant phenomenon of the modern world that needs to be thoroughly explored to enjoy its positive aspects and counteract its adverse effects.

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IvyPanda. (2023, November 2). Globalization: Positive and Negative Effects. https://ivypanda.com/essays/globalization-positive-and-negative-effects/

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IvyPanda . 2023. "Globalization: Positive and Negative Effects." November 2, 2023. https://ivypanda.com/essays/globalization-positive-and-negative-effects/.

1. IvyPanda . "Globalization: Positive and Negative Effects." November 2, 2023. https://ivypanda.com/essays/globalization-positive-and-negative-effects/.

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IvyPanda . "Globalization: Positive and Negative Effects." November 2, 2023. https://ivypanda.com/essays/globalization-positive-and-negative-effects/.

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• Published: 16 April 2024

Privatisation of government services in Australia: what is known about health and equity impacts

• Julia Anaf   ORCID: orcid.org/0000-0002-9562-2309 1 ,
• Toby Freeman 1 &
• Fran Baum 1  

Globalization and Health volume  20 , Article number:  32 ( 2024 ) Cite this article

Metrics details

Historically in Australia, all levels of government created collective wealth by owning and operating infrastructure, and managing natural assets, key public goods and essential services while being answerable to the public. This strong state tradition was challenged in the 1980s when privatisation became a widespread government approach globally. Privatisation involves displacing the public sector through modes of financing, ownership, management and product or service delivery. The Australian literature shows that negative effects from privatisation are not spread equitably, and the health and equity impacts appear to be under-researched. This narrative overview aims to address a gap in the literature by answering research questions on what evidence exists for positive and negative outcomes of privatisation; how well societal impacts are evaluated, and the implications for health and equity.

Database and grey literature were searched by keywords, with inclusion criteria of items limited to Australia, published between 1990 and 2022, relating to any industry or government sector, including an evaluative aspect, or identifying positive or negative aspects from privatisation, contracting out, or outsourcing. Thematic analysis was aided by NVivo qualitative data software and guided by an a-priori coding frame.

No items explicitly reflected on the relationship between privatisation and health. Main themes identified were the public cost of privatisation, loss of government control and expertise, lack of accountability and transparency, constraints to accessing social determinants of health, and benefits accruing to the private sector.

Our results supported the view that privatisation is more than asset-stripping the public sector. It is a comprehensive strategy for restructuring public services in the interests of capital, with privatisation therefore both a political and commercial determinant of health. There is growing discussion on the need for re-nationalisation of certain public assets, including by the Victorian government.

Privatisation of public services is likely to have had an adverse impact on population health and contributed to the increase in inequities. This review suggests that there is little evidence for the benefits of privatisation, with a need for greater attention to political and commercial determinants of health in policy formation and in research.

Historically in Australia, all levels of government created collective wealth by owning and operating infrastructure, and managing natural assets, key public goods, and essential services while being answerable to the public. This was part of a strong state tradition [ 1 ] which was challenged in the 1980s when privatisation became a widespread government approach globally. In low and middle income countries this was imposed by the World Bank through Structural Adjustment Packages (SAPs) which have been shown to weaken the public sector and result in less accountable services [ 2 ]. In high income countries, privatisation was enacted by governments which adopted neo-liberal policy prescriptions; and by the 1990s Australian State and Federal Governments were privatising a significant portion of the public sector [ 3 ].

Privatisation involves displacing the public sector through modes of financing, ownership, management, and product or service delivery [ 4 ]. It encompasses outsourcing, whereby governments ‘contract out’ traditional public sector functions to private service providers. It also includes entering into public-private-partnerships (PPPs) for infrastructure projects which are financed and built by agreement with private corporations under long-term arrangements [ 5 ]. PPPs have a contested history in Australia, with a contract failure of over 50 per cent for hospital partnerships and do not lead to greater efficiency in service delivery [ 6 ]. There is a familiar ideological debate between promoters of publicly managed services and those favouring a stronger role for the private sector, with accountability arrangements for the private sector not clearly defined [ 7 ]. Democratic risks are identified as PPPs are long-term and may extend beyond a particular parliament [ 6 ].

Another mode is competitive tendering, or the process of selecting a preferred supplier from a range of potential contractors by seeking offers or tenders, and evaluating these against selection criteria [ 8 ]. Reports and academic literature on competitive tendering and contracting by public sector agencies in Australia have reviewed the benefits and costs, noting diverse claims about its effects [ 8 , 9 ]. Competitive tendering expanded from basic services to core government activities such as human service provision including prison management, employment assistance, and hospital services [ 10 ]. Competition may improve quality in normal markets. However, there are costs involved with implementing reforms, and it has been argued that pro-competive policies are not a solution, and may even cause harm [ 11 ].

Governments and industry have continued to call for further privatisation and sale of public assets over decades, with a commitment to supporting greater private sector investment, streamlining tendering processes, reducing ‘red tape’, and promoting the sale of public assets towards other forms of reinvestment [ 10 , 12 , 13 , 14 ]. Dissenting views have argued that the implementation of competitive tendering, including in the social welfare sector, results in a range of negative impacts including loss of autonomy, reduced collaboration, learning, choice and diversity, and increased administrative costs [ 9 , 15 ].

Privatisation approaches now include contracting out high-level communication and information technology functions, and using public funding to contract major multinational consulting, legal and accounting firms to provide advice to governments on a wide range of policy issues including aspects of privatisation [ 16 , 17 ]. Advocates argue that privatisation can act as a public good (eg.13), or that it improves accountability [ 18 ]. However, global changes including de-regulation, privatisation, and the entry of foreign capital has changed the relations between the state and the market [ 19 ].

The dominant view of privatisation is that it is largely as a government economic or fiscal technique, concerned with transferring activities and / or assets from the public to the private sector. Although correct, this is arguably a narrow and one-dimensional view, as it focuses exclusively on the financial sphere [ 20 ]. Whitfield [ 21 ] provides a typology to understand the ways in which public services and the welfare state are transformed by privatisation and marketisation across four domains. These relate to global public goods, privatisation of assets and services, privatisation of governance and democracy, and privatisation of the public domain. This includes the primacy of market values, and privatisation of public intellectual capital and public space [ 21 ].

Privatisation affects people’s access to the social determinants of health (SDoH), including secure employment, education, and transport [ 22 , 23 ]. Furthermore, reduced government intervention in markets since the 1980s, from adoption of neoliberal policy approaches, has undermined oversight and control of the private sector’s influence on population health and equity [ 24 ]. Outsourcing of government functions to the private sector also has detrimental effects on the capacity of the Australian public service [ 25 , 26 ]. The Australian literature suggests that when there are negative effects from privatisation, the harms are not spread equitably [ 27 ]. However, the health and equity impacts of privatisation appear to be under-researched, hence the need for a review of this literature.

Our narrative literature review on privatisation of government services in Australia aims to address a gap in the literature by seeking to answer the following research questions:

What evidence is there for negative or positive outcomes of privatisation?

How well are the societal impacts of privatisation evaluated?

What are the implications for health and for health equity from the privatisation of public services?

The review process was guided by Green et al., 2006 & Ferrari, 2015’s key features of narrative reviews [ 28 , 29 ].

Data collection

Data sources were the Web of Science, Proquest Central, Informit, and Scopus databases for peer reviewed literature, and Analysis and Policy Observatory (APO) and Google Scholar for grey literature. Search terms and the database search string were compiled by the co-authors and refined by a university subject librarian to capture the context of privatisation, outsourcing, and contracting out, together with the associated outcomes, results, impacts, consequences, effects, evaluation, successes, failures, or other measures:

Search string: ALL= (privati? ation OR outsourc* OR “contracting out”) AND ALL= (outcome* OR result* OR impact* OR consequence* OR effect* OR evaluat* OR success* OR fail* OR meas*).

Inclusion criteria were items limited to Australia, published in English between 1990 and 2022. Database searches captured some literature from the 1980s, but most was from 1990 onwards, and the search spanned 1990 to the start of the review in 2022. Inclusion criteria were any industry or government sector which included an evaluative aspect, or identified positive and/or negative aspects from privatisation, contracting out, or outsourcing. Documents were excluded if they did not meet the above criteria.

Database searches were augmented by selected grey literature in consultation with a university subject librarian. Australian Policy Observatory was searched on 26/7/2022 using the same search terms as for the databases, but limited to title only and for the period 2010–2022. Two hundred and seventy eight abstracts were screened and 16 items saved for full text reading. Google Scholar was searched on 2/8/2022 using the search term ‘Privatisation in Australia’. This resulted in 489 ‘hits’, with the first 350 reviewed before relevance declined. Seven items were saved for full text reading. The reference lists of several key articles were also checked for potential inclusion through snowballing. After screening, the items reserved for full text reading were saved in an EndNote library. A database search tracking sheet was compiled to record details of the data collection process.

Summaries of saved items were compiled to aid reflection on those most suitable for inclusion in the review [ 28 ] (See Table  1 ). Thirty six of the saved documents were selected on the basis that they included an evaluative aspect, or cited positive or negative aspects that may help to understand health and / or health equity impacts of privatisation. A brief overview of each item was recorded in a Summary Table as recommended by Younas & Ali [ 30 ]. (See Appendix 1 ). JA completed the selection process in consultation with co-authors in team meetings, and subsequent recommended selective literature searches augmented the background literature.

Data analysis

All selected items were imported into NVivo qualitative data software to assist with thematic analysis [ 31 ]. An a-priori coding frame was developed by the co-authors and augmented by sub-codes reflecting the research questions (See Appendix 2 ). JA undertook the coding in collaboration with, and with verification by TF and FB in a team meeting. Insights from the coding were later discussed by all authors to help identify key themes.

The analysis revealed only five documents which mentioned (generally qualified) positive aspects of privatisation. No articles explicitly reflected on the relationship between privatisation and health. However, there were articles that described the impact of privatisations on known social determinants of health. Very few articles reported positive societal impacts and most provided evidence for negative effects on SDoH.

The main themes identified were the (1) public cost of privatisation, (2) loss of government control and expertise, (3) lack of accountability and transparency, (4) constraints to accessing SDoH, and (5) benefits to the private sector (Fig.  1 ).

Privatisation key themes

The public cost of privatisation

One rationale for privatisation is the presumption of cost savings. However, in their survey of privatisation of Australian government enterprises since the 1980s, Abbott & Cohen [ 32 ] stated that few studies have been undertaken on the distribution of costs and benefits of restructuring and privatisation. Although privatisation can lead to increased efficiency, it may be difficult to distinguish between gains from increased competition, regulation, or privatisation. However where such gains are achieved, the costs and benefits are distributed unequally between consumers, employees and shareholders [ 32 ].

Loss of government control and expertise

Loss of government control and expertise was highlighted in findings related to outsourcing health and social welfare provision. The impact of changes to service delivery models on the administration of Government programs was the focus of a 2020 Australian Senate Inquiry into the privatisation of state and territory assets and new infrastructure [ 33 ]. The committee heard that outsourcing human services has negative outcomes for the most disadvantaged Australians while also undermining the capacity of the public sector to design and deliver effective services [ 34 ]. Australia spends hundreds of million of dollars annually on private consultancies to deal with the impact of enforced public service staffing caps which in 2020, was equivalent to 12,346 public service roles [ 35 ]. With a reduced public service, COVID-19 management failings occurred in the rollout of vaccines, testing and tracing, and by the use of casualised and under-qualified workforce in aged care. As the policy report by Dyrenfurth [ 36 ] argues, this led directly to the COVID-19 crisis and deaths, especially amongst the elderly.

Tilley [ 37 ] explored the role of the automation and outsourcing of aspects of social security systems and its impact on recipients. In 2016, the Australian Government introduced a cashless debit card with the stated aim of reducing social exclusion and addressing social harms including gambling and substance abuse. It entered into a PPP arrangement with the private bank Indue Limited which was contracted to administer the automated payment system. During the first year of trialling, the card cost approximately $10,000 per participant to administer, with $128.8 million included in the forward estimates to expand the program [ 37 ]. As well as the financial impost, the relinquishing of primary control of the data to a private entity undermined the government’s exclusive powers of surveillance, with potential for further data-sharing. It changed the relationship between the citizen and the state and reproduced the social harms the card was purported to address [ 37 ].

Lack of accountability and transparency

Lack of accountability and transparency were common themes in the review, including for privatised infrastructure projects, human service provision for community and corrective services, and for privatised employment and outsourced hospital services. In research into the privatisation of electricity and urban rail, and PPPs for road infrastructure in Victoria, Hodge & Coghill [ 38 ] noted negative impacts on democratic accountability to citizens and public institutions. The initial divestiture of electricity involved secrecy, and removal of prior rights to information under administrative law by weakening Freedom of Information laws [ 38 ]. Following the privatisation of urban rail, accountability to passengers was dramatically reduced.

Lack of accountability and transparency was also a key feature of human service provision revealed in their report into privatisation of prisons by Andrew, Baker et al. [ 39 ]. Australia has the highest rate of private incarceration per capita, with 20 per cent of the prison population held in privately-run facilities [ 40 , 41 ]. Andrew, Baker et al. concluded that there was no evidence that private prisons are cost effective. There is a lack of state uniformity, evidence of improved performance and efficiency gains are incomplete and lacking transparency, there is poor public reporting, and the true cost of private incarceration remains unknown [ 39 ]. While accountability systems and performance management have become more sophisticated, publicly available information allows for little real scrutiny.

Other researchers also note that commercial-in-confidence provisions ‘cast a shroud of secrecy’ over Victoria’s privately operated prisons, undermining the ability to identify contractual violations or potential remedial actions (42 p. 228). A major constraint to accountability is the lack of an independent body responsible for oversight, with Victoria maintaining an ‘in-house’ review and monitoring scheme which lacks public transparency [ 42 ].

In their report on the impact of privatisation and outsourcing on community services, Mitchell et al. [ 43 ] explain that although outsourcing has been applied to a wide range of public services, public reporting is rare. PPPs involve complex contracts, but the costs to the state are obscured by ‘commercial in confidence’ declarations.

Lack of transparency and accountability were also highlighted in the provision of privatised employment services, with Rogers [ 44 ] reporting that it may be difficult to determine to whom not-for-profit organisations are ultimately accountable. Although outsourced employment contracts define obligations to government, organisations may also have obligations to service users, religious entities, or financial backers [ 44 ]. Tensions therefore arise between not-for-profit service providers’ values and government employment policies [ 44 ].

Young used empirical evidence and theoretical literature to discuss outsourcing of several support services for a large Victorian hospital in 1997. This study found a lack of transparency and minimal financial reporting, with service quality sacrificed to reduce costs. Management by contractual arrangements was deemed problematic [ 45 ]. The McKell Institute also investigated the ownership structure of the health system and identified that privatising public assets is a business ‘fraught with risk’, especially in relation to healthcare. Critically, it was argued that a broad consideration of the merits of widespread health privatisation demands that policy makers first determine whether further privatisation risks eroding the concept of universal healthcare and whether it could threaten equity of access [ 46 ].

Constraints to accessing social determinants of health

Social factors including employment status, education and income level strongly influence a person’s health [ 47 ]. There are wide disparities in the health status of different social groups in all jurisdictions [ 47 ], with social and economic inequities leading to health inequities [ 48 ]. The review found wide-ranging constraints to accessing the social determinants of health spanning privatised employment services, education, human rights, and infrastructure.

Employment services: job seekers

Employment is a key SDoH [ 49 ], with the review highlighting a range of constraints for both unemployed people and service providers. The Commonwealth Employment Service was privatised in 1998 under the Howard Government. Within the outsourced employment services regime which followed, unemployed people aged 18 to 29 years, registered with Job Services Australia (Workforce Australia), were required to undertake a work experience program called ‘Work for the Dole’ [ 50 ]. The rationale was to provide job seekers with services needed to acquire new skills and to improve their chances of finding paid employment under Australia’s ‘mutual obligations’ policy framework [ 51 ]. In their evaluation of the Work for the Dole scheme between 2014–2015, Kellard et al. [ 52 ] noted certain positive and negative aspects of this active labour market program. However, the term ‘work for the dole’ reflected legacy issues that associated the program with undertaking menial tasks such as graffiti removal, and was stigmatising and unhelpful overall for engaging job seekers. Work for the Dole was perceived to be punitive, and a source of free labour, rather than for prioritising provision of relevant work experience for job seekers [ 52 ].

A competitive tendering framework encourages service providers to meet the specified goals in the most cost-effective manner [ 53 ], but with perverse incentives. These result in activities referred to as ‘creaming’ or ‘cream skimming’ (focusing on more able clients with better employment prospects, and ‘parking’ (under-serving harder to place clients). These are forms of ‘adverse selection’ where clients are chosen for assistance in inverse proportion to need [ 53 , 54 ]. Service providers are given incentives to seek out those clients whose needs can be more easily met, with other job seekers diverted to ‘providers of last resort’, or receive no service at all [ 53 ]. These findings accord with the view that privatised businesses are less sensitive to the situation of poorer ‘customers’ who are not directly profitable to serve [ 55 ].

Research by Moore [ 56 ] found that young people are another disadvantaged job seeker group who are served inequitably under privatised employment services. They experience vocational barriers including limited opportunities for work experience, difficulties accessing transport, and high incidence of mental health problems and family issues [ 56 ]. However, evaluations of Australian employment services have often neglected to consider young job seekers, despite a persistently high youth unemployment rate. Moore [ 56 ] also notes that three evaluations of the Job Active program found that although there were some cost savings, not all young job seekers were benefitting equitably. However as also noted, it was people living with disabilities and Indigenous job seekers who were the most negatively affected cohorts.

Other research on employment services by Burgess showed that market-style operations are unhelpful for unemployed people who lack the necessary resources to find a job [ 57 ]. Real choice for service users was limited by a lack of information about service providers, and decisions could be over-ridden by Centrelink, the government agency which is responsible for service allocation. As Burgess notes, with publicly-funded provision there is no real market, but a contrived or quasi-market. The participants are the Federal government as the ultimate purchaser of services, agencies which sell services, Centrelink as allocator of services, and Job seekers who are the service users. Within the privatised regime there is thus an inherent tension between price and quality of services [ 57 ].

Employment services: employees

Employees are also affected by privatisation, with some service providers facing internalised conflicts over their roles. For over a century in Australia, faith-based organisations have traditionally provided welfare services to disadvantaged populations. However, interviews with faith-based service providers in outsourced agencies [ 58 ] revealed the challenge of being unable to fulfil their distinctive holistic core missions and express their values when governments prioritise market-based approaches to contracting out. The challenge for these agencies is deciding whether to accept ‘tied’ government funding, and if they do so, find ways to adapt to protect their values, seek alternative funding sources, or withdraw completely from service delivery [ 58 ]. This potentially limits options for citizens in vulnerable circumstances.

Mitchell et al. [ 43 ] explain that while transnational corporations (TNCs), or for-profit providers, play a large role in delivering outsourced services in Australia, the not-for-profit (NFP) sector, which operates from a different financial and values base, has also embraced government services provision, but in doing so, lose their capacity to advocate to government on behalf of their traditional clientele. Rogers [ 44 ] discusses the need for staff in NFP service provision to increasingly focus on financial aspects of the organisation, whereby workers may become less responsive to job seekers and more rule-bound.

Some NFP service providers claim that they are conflicted by the need to impose demerits and financial penalties for non-compliance by disadvantaged and vulnerable people. Some organisations also choose not to challenge aspects of government policy for fear that their employment network may be negatively affected [ 44 ]. Staff report unhappiness also with the high administrative load and general systems operations. The NFP sector relies heavily on volunteers but there is limited information on any implications for workers, volunteers and organisations [ 44 ].

The review of the literature highlighted employment constraints in other human service sectors and employment cohorts, including employees. In their research on austerity, staffing inadequacy, and contracting-out in aged care, Farr-Wharton et al. [ 59 ] found that employees who work in a facility that has inadequate staffing and offers low peer-support often seek alternative employment. This leads to increased workers compensation claims and retention costs that are externalised to the taxpayer.

Negative outcomes for employment also occur under the correctional services regime. This has resulted in poor outcomes for prison workers in most states from staff cuts as part of the privatisation process [ 39 ]. In Western Australia, the Economic Regulation Authority (ERA) argued that a benefit of introducing private providers was a reduction in the costs of workers’ entitlements, with prisoners viewed as ‘stakeholders’, but prison officers as ‘a cost to that system’ (39 p. 5).

Education providers identified in the review include Technical and Further Education (TAFE) and early childhood education and care (ECEC). Rodd researched the experiences of TAFE workers from the transformation of the vocational and training sector (VET) between 2012 and 2017 [ 60 ]. Under these changes students became ‘customers’, and VET service providers were forced to compete for market share. The research revealed significant economic cost for taxpayers, with students left heavily indebted and bearing the major cost of privatisation [ 60 ].

Once largely managed by the community sector, ECEC services have also shifted to for-profit providers. This has driven down operational standards, reduced access to care, and imposed a cost to taxpayers [ 61 ]. The Australian Council of Trade Unions (ACTU) notes that these workers are often early victims of cost-cutting and profit seeking which leads to underpayment, overwork, and insufficient support.

Unions are arguably an unappreciated SDoH [ 62 ]. They help to raise wages, decrease inequality, decrease discrimination, improve workplace safety and affect other health determinants [ 62 ]. The review identified research revealing the impact of privatisation on union membership. Oliver [ 63 ] examined two Western Australian unions and found that privatisation was a key factor in declining union membership and union power. A ‘clearing out’ of ageing workers occurred in some industries under both major political parties in preparation for privatisation, leading to large job losses and a loss of union culture [ 63 ]. This specific case supports the more general correlation between unions and access to SDoH in the form of higher wages, lower income inequality and other factors [ 62 ]. Research by Young found that while privatisation resulted in some cost savings it also led to a reduction in union power, the nature of the relationship between contract and internal staff, and service quality [ 45 ].

Human rights

Human rights are key to addressing inequities in SDoH [ 64 ]. The review identified constraints to human rights due to the privatisation of Australian immigration detention facilities, and from workers’ rights to compensation. The management of Australian immigration detention facilities was outsourced from 1998 under a range of successive contractual regimes. In researching the opportunities and challenges for implementing human rights within Australian privatised detention centres, Penovic [ 65 ] notes that even though the Federal Government cannot outsource its common law duties or international human rights obligations, the removal of direct ministerial responsibility can obscure government responsibility for human rights abuses when it is distanced from its own policies. Australia’s detention regime is deemed to be abusive and inconsistent with human rights, and Penovic notes these features are exacerbated by the privatisation of management [ 65 ].

Crowley-Cyr [ 66 ] notes that although the state’s duty of care for those under its control and supervision cannot be delegated, contemporary contractualism legitimates social exclusion by focusing only on the purchase of outputs, rather than the delivery of outcomes. This focus limits the extent of an individual’s contract with the state and has led to violations of immigration detention standards and operating procedures of a contractor (GSL). This was in respect of receiving appropriate medical assessments and treatment for injuries, being denied basic amenities, and that detainees were ‘humiliated and treated in an inhumane, unsafe and undignified manner’, and with the application of undue force during transportation (67p. 95).

In 1999, the Western Australian Parliament passed the Court Security and Custodial Services Act which allowed for outsourcing prisoner transportation, with prison management transferred in 2007 to GSL Custodial Services Pty Ltd (GSL) (now known as G4S) which provides privatised services to the Australian justice system including correctional facilities, courts, police custody, electronic monitoring, prisoner transport and offender rehabilitation [ 67 ] A Coroner’s Inquiry followed the death of an Indigenous Elder by heat exhaustion in 2008 during a prison transfer by G4S. The coronial findings noted a lack of policies and procedures, inexperienced staff, and a lack of oversight from the Western Australian Department of Corrective Services [ 68 ].

The 1966 human rights Covenants, the right to work and rights in work, are addressed in the International Covenant on Economic, Social and Cultural Rights [ 69 ]. Workers’ compensation in event of workplace injury, disease or death is a critical determinant of health for workers and their families, with many employers acknowledging financial wellbeing as a SDoH for workers [ 70 ]. A case study of outsourcing claims administration for the South Australian workers’ compensation scheme, conducted by Purse [ 71 ], found that outsourcing failed to meet its objectives, that employees’ interests and rights were often subordinated to those of employers, and that the system lacked accountability.

Infrastructure

Wide-ranging privatisation of infrastructure has occurred in Australia with this review noting telecommunications and banking services, ports and airports. Privatised markets require regulations to protect people’s interests. Despite the ideological similarity of the goals of privatisation and de-regulation, Stretton [ 72 ] noted that privatisation has generally led to increased regulation. Webster [ 73 ] conducted research into the performance of regulation in the Australian Telecommunications industry during a period of privatisation (six months between 1999 and 2000), finding that rural customers were disadvantaged in receiving services. The regulatory focus was on performance; doing mainly what is measured in order to meet compliance, while neglecting other important areas of customer service [ 73 ]. Regulations thereby failed to ensure a universal standard of service.

The National Partnerships Agreement on asset recycling initiative (ARI) provides incentives to State and Territory Governments to sell government-owned assets to reinvest in economic infrastructure [ 74 ]. In their 2014 submission to a Senate Standing Committee on the privatisation of state and territory assets and new infrastructure, the Australia Institute [ 75 ] argued that the ARI is built on a presumption, without empirical basis, that privatisation is always preferable, and highlighted that many of its advocates have vested interests. They note that since the Commonwealth Bank was privatised, many retail bank branches in regional areas have closed because they did not deliver the very high rates of returns required of the privatised bank, and this has led to poor service outcomes [ 75 ].

Privatisation of infrastructure including Australian ports has also adversely affected local employment [ 76 ]. Prior to privatisation, port users including union members were board directors. However, the boards are now skewed towards business representatives such as from investment funds [ 76 ]. Although private port companies often offer a guarantee of no job cuts within a specified timeframe, evidence shows a reduction in the workforce at privatised ports once this time elapsed. Research shows a 31 per cent decrease in the number of employees at the Port of Brisbane due to job losses from workers who left the operations not being replaced, and through contracting out of maintenance work [ 76 ].

Job losses were also identified in research by O’Donnell et al. [ 77 ] on the privatisation of Sydney Airport. The Federal Labor Government led the privatisation process for federal airports, negotiating with five unions in 1995 so that successful bidders maintained existing airport staff and their wages, employment conditions, and entitlements for a period of 12 months. However, one year after the sale, 40 per cent of the workforce (160 employees) were made redundant in order to reduce costs [ 77 ] This underscores the negative impacts on unions reported earlier in this review.

Benefits to the private sector

A key theme emerging from the review was the many ways by which privatisation benefits the private over the public sector. These benefits accrue from hospital and wide-ranging infrastructure privatisation and the scope of outsourcing services to large transnational corporations (TNCs). These entities also benefit from engaging in tax minimisation strategies in undertaking their roles. As uncovered in their report on hospital privatisation, the McKell Institute showed that private operators may choose to only manage the most profitable services, leaving the public sector to undertake the more difficult and costly work. The ultimate responsibility for failures associated with social infrastructure projects is borne by governments when a private partner is either unable or chooses not to uphold its contractual obligations [ 46 ].

Case studies of contracting out undertaken by Quiggin [ 53 ] covered the scope of road contracting, school cleaning services, water and employment services, Commonwealth information technology services, and the Commonwealth Serum Laboratories (CSL). Quiggin found that presumed public benefits of contracting out have been overestimated. There may be benefits in cases where peripheral government risks can be successfully transferred to a contractor who is able to manage those risks, but badly designed contracts can result in governments, and hence the community, bearing high risks while gaining no return. Such policies may therefore reduce rather than enhance public welfare and so impact adversely on health and health equity [ 53 ]. Quiggin argued for consideration of a return to public ownership in some instances [ 78 ].

The privatisation of electricity networks also benefits the private sector due to the operations of ‘gentailers’. These are companies which are both retailers and generators which allows them to take advantage of both wholesale and retail markets, with governments assuming responsibility for maintaining costly and unprofitable aspects of operations, including poles and wires [ 79 ]. The benefit of privatisation to the private sector from the privatisation of electricity is also noted in research by Cahill and Beder [ 80 ]. Large corporate electricity consumers in Australia received the greatest gains during the 1990s, having successfully lobbied government for guaranteed fixed prices which were effectively subsidies by the broader population.

Some large corporations also gain significant financial benefit from being contracted to provide multiple public sector roles. In a commentary about the growing power and influence of one large TNC, O’Keefe [ 81 ] notes that Serco, [revenue £4.425 billion 2021] is contracted by governments for roles in hospitals, prisons and prisoner transport, immigration detention centres, military logistics, military health support, traffic management, health, justice, and other arenas. The only common theme across this wide portfolio is that these roles were all previously undertaken by governments [ 81 ].

Privatisation has also created benefits for investment banks which can impose multiple charges for the one transaction. This includes setting up, then managing funds and individual assets [ 79 ]. Other financial benefits accrue to the private sector when companies that adopt aggressive tax avoidance strategies are still rewarded with lucrative government contracts [ 33 ]. This has implications for population health and equity due to the loss of government revenue for health and social investment.

In their article on the privatisation of custodial services, Baldino et al. [ 68 ] highlight that training requirements for the private security industry remain limited and inconsistent, and include a strategy of ‘lowballing’. This allows private companies to benefit by using low bids to gain a government contract which is then re-negotiated at a higher rate [ 68 ]. Such practices mask the benefits of privatisation to the private sector and counter claims of cost-effectiveness for the public sector.

Collyer et al. who undertook nine case studies of privatisation during the 1990s concluded that those who gained most from privatisation were those with resources and influence, while those who were most negatively affected had no opportunity to even engage in the decision-making process [ 27 ]. These researchers identified that clear winners included politicians and political advisers; consultants and associated businesses; banks and financial institutions; high-income employees; political parties; investors and new owners; consumers and customers. Clear losers were low-income and non-management employees; citizens and the state [ 27 ].

The main aim of our narrative review was to identify the impacts privatisation has had on health. As Fig.  2 depicts, these pathways include the undermining of human rights, the need for increased regulation, the long term implications of a reduced public sector capacity, the shift of public sector funds to private profits and reduced employee wellbeing.

Pathways from privatisation to health and equity

Since the 1980s, Australia and its economy has been radically transformed by the processes of privatisation, de-regulation and marketisation, with an ideological adherence to the hollowing out of the state [ 16 ]. In Australia, the latest available statistics reveal that privatisation saw government-owned enterprises dropping from 7% of gross domestic product (GDP) in 1989-90 to 1.3% in 2011-2 [ 82 ]. They reveal that between 1987 and 2012 the proceeds of privatisation in Australia amounted to AU $194 billion dollars [ 83 ]. This narrative review of privatisation describes the running down of public services and the advantages given to the private sector actors who take on the divested roles. Whitfield argued that ‘privatisation is more than asset stripping the public sector; it is a comprehensive strategy for permanently restructuring the welfare state and public services in the interests of capital’ (1983: 1–2).

Privatisation and marketisation, or the introduction of competition into public services, are interlinked, with the latter creating the overarching social and economic conditions that foster further privatisations [ 21 ]. Our review suggests that we found evidence for each part of Whitfield’s four part typology [ 21 ]. For example, the marketisation of public goods includes public health, while the privatisation of assets and services includes private finance of infrastructure and services under PPPs. Privatisation of governance and democracy includes the transfer of services to arms length companies and the corporatisation of quasi-public bodies. The public domain encompasses the replacement of public service values and principles by market ideology and commercial values [ 21 ]. This implies that the impacts of privatisation in Australia has been more than the sum of its parts because the broader aim of undermining the public sector has been achieved.

Privatisation is both a political and commercial determinant of health: the systematic process of distributing resources, structuring relationships, administering power simultaneously in ways that ‘mutually reinforce or influence one another to shape opportunities that either advance health equity, or exacerbate health inequities’ [ 84 p. 9, 85 ]. As the main responsibilities of the private sector are to their shareholders, the private sector should not be presumed to act in the public interest. Governments are primarily responsible for ensuring that the public interest is accounted for when determining any form of privatisation [ 86 ]. As this is not always accepted by governments, there have been cases where there is a lack of public compensation from divestments, due to weak regulations [ 86 ]. Governments have a responsibility to regulate privatisations and also to evaluate whether the intended benefits are actually achieved. The finding that ministers generally maintain an ‘arms length’ approach to privatisation shows the lack of political will to regulate for health and equity outcomes [ 38 , 65 ].

The case studies by Hodge and Coghill [ 38 ] found that while privatisation per se may not have cost votes, prioritising of managerialist values over public accountability did. This highlighted the paradox, that when privatising government operations it is necessary to strengthen mechanisms of public accountability. This is particularly the case if a government wants to follow an equity agenda. Equity outcomes are generally achieved when public policy takes proportionate actions in favour of groups that are disadvantaged in universal systems [ 49 , 87 ]. Our review found no evidence of equity considerations being built into privatisation projects.

As the research by Collyer et al. [ 27 ] discovered, those who benefit from privatisation are mainly those with existing resources and influence. Those for whom privatisation has negative impacts are those who are unable to participate in decision-making even though they have the most to lose. Costs and benefits of privatisation have therefore been borne inequitably, with a clear transfer of public funds and resources to the private sector with health inequities flowing from these social and economic inequities [ 48 ].

Given that different forms of privatisation and impacts are so embedded in the current political landscape, these are difficult to overcome. In the short term this will require fairer contracts, better governance, accountability, and regulation. In the longer term this may require assets and services being brought back into government control. Remunicipalisation, de-privatisation’ or ‘in-sourcing’ are terms which refer to the process of bringing privately owned and/or managed services back into full local government ownership, management, and control [ 88 ]. The term municipalisation refers to the establishment of new public services and institutions to meet collective needs [ 89 ].

Arguably, in 30 years of privatisation in Australia, there is no instance of privatisation where the public would have benefitted as much as if the asset remained in public hands [ 90 ]. Instances of privatisation failure deny the notion that privatisation is irreversible, with the call for a rational and systematic re-evaluation of the appropriate roles of the private and public sectors [ 78 ]. While political actors often view privatised infrastructure as an unchallengeable necessity, the general public has largely voted against privatisation whenever the opportunity arises [ 91 ].

As Spoehr contends, the experience of COVID-19 has particularly challenged the privatisation narrative, forcing government to re-evaluate the role of the public sector; with the marshalling of public services, including the public health system, community services, support systems for income and business, and the police [ 92 ]. A strong case now exists for renationalising a broad scope of public assets including electricity transmission, airports and roads [ 90 ]. For example, recently announced was the intention to revive the Victorian State Electricity Commission to fast-track de-carbonisation as the government lacks confidence that the private sector can do so in a timely manner [ 93 ].

Reversing privatisation is not easy. However, there are also other ways to bring back private services into public control. One is to abolish compulsive competitive tendering to eliminate the role of bidding by the private sector [ 94 ]. Another is policy reform to prioritise public ownership and control over privatisation [ 95 ]. The need to restore public staffing levels highlights the importance of bolstering state capacity [ 96 ].

This review suggests that there is little evidence for the benefits of privatisation, with a need for greater attention to political and commercial determinants of health in policy formation and in research. We can conclude from our review that evidence exists that privatisation is likely to have had an adverse impact on population health and contributed to the increase in inequities over the period of privatisation, and so of health equity.

Data availability

All data is included in the paper.

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Acknowledgements

The authors sincerely thank the two anonymous reviewers for their helpful comments on the paper.

All authors were supported by Professor Baum’s NHMRC Investigator Grant (2009323).

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Julia Anaf, Toby Freeman & Fran Baum

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JA collected the data. JA, TF, and FB analysed and interpreted the data. JA wrote the first draft of the paper and all authors contributed to later drafts and approved the final document.

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JA and TF declare they have no competing interests. FB is a board member of the Cancer Council of South Australia, and is on the Advisory Council of the People’s Health Movement: a global network of health activists.

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Anaf, J., Freeman, T. & Baum, F. Privatisation of government services in Australia: what is known about health and equity impacts. Global Health 20 , 32 (2024). https://doi.org/10.1186/s12992-024-01036-w

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Received : 27 March 2023

Accepted : 28 March 2024

Published : 16 April 2024

DOI : https://doi.org/10.1186/s12992-024-01036-w

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• Privatisation
• Outsourcing
• Contracting out
• Private public partnerships
• Health equity
• Social determinants of health
• Commercial determinants of health

Globalization and Health

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