Accounting for Contribution of Trade Openness and Foreign Direct Investment in Life Expectancy: The Long-Run and Short-Run Analysis in Pakistan

Abstract

This paper examines the impact of trade openness and foreign direct investment (FDI) on life expectancy using time series data over the period of 1972–2013. We have applied structural break unit root as well as cointegration tests to examine integrating properties of the variables and cointegration among the variables. The causal linkage between the variables has been tested by applying the VECM Granger causality. The empirical evidence confirms the presence of cointegration amid the variables. Moreover, trade openness and FDI increase population health measured by life expectancy in the long-run. Furthermore, the analysis suggests that trade openness and FDI cause life expectancy in the short-run. These findings have several policy implications to improve life expectancy for the people of Pakistan in particular and other developing countries in general.