Effects of Trade Liberalization on Health: Evidence From the Size of Trading Networks

ABSTRACT This paper estimates the impact of the number of trading partners on public health. The identification strategy exploits the gravity equation to estimate country‐fixed effects on the likelihood of trading network formation in the first stage. Then it uses the fixed‐effect estimates as control functions in a second‐stage model that relates health outcomes to the number of trading partners. We find that opening trade with more countries deteriorates domestic health, such as a lower life expectancy and a higher child mortality, death rate, and HIV infection. Further investigations suggest that the mechanism probably operates through spillover effects, in which the average health quality of trading partners declines when the home country expands its trading network by trading with more developing countries.