HEALTH AID, GOVERNANCE AND INFANT MORTALITY Chris (Hristos) Doucouliagos Department of Economics with Jack Hennessy and Debdulal Mallick

1. Background Health outcomes differ vastly across countries: Life expectancy is 53 years in Nigeria vs 84 years in Japan Maternal mortality is 1,360 in Sierra Leone per 100,000 vs 3 in Poland Infant mortality is 63 per 1,000 in Pakistan vs 3 in Australia

“Defeating poverty today is the equivalent of defeating slavery in the 19th century.” Tim O'Connor (UNICEF, Australia)

International policy objective Health the focus of: four of the eight Millennium Development Goals (United Nations, 2016) three of the Sustainable Development Goals (United Nations, 2018).

Policy objective of many countries Infant mortality is a key national health objective: Vietnam (Glewwe et al., 2004) Tanzania (Makani et al., 2015)

2. Our contribution Conceptual: aid effectiveness conditional on governance Empirical: long difference estimator new IV

Prior studies Mixed and fragile results (Williamson, 2008; Mishra & Newhouse, 2009; Nunnenkamp & Ӧhler, 2011; Wilson, 2011; Glassman & Temin, 2016; Tarverdi & Rammohan, 2017). How to resolve conflicting findings? make aid effectiveness conditional on good governance and by addressing endogeneity through IV estimation.

Core finding The impact of health aid on infant mortality is conditional on good governance. Health aid reduces infant mortality in countries with good governance. (government effectiveness or control of corruption)

3. Aid and governance conditionality Willingness and capacity to respond to preferences Corruption (can go either way depending on govt. strategic behavior) Investment in public goods

4. Models ∆ 5 𝑀 𝑖𝑡 = 𝛼+𝛽 0 𝑀 𝑖𝑡−5 + 𝛽 1 𝐴𝑖𝑑 𝑖𝑡−5 + 𝛽 2 𝐴𝑖𝑑 𝑖𝑡−5 ∗ 𝐺𝑜𝑣 𝑖𝑡−5 𝐴𝑖𝑑 𝑖𝑡−5 ∗ 𝐺𝑜𝑣 𝑖𝑡−5 +𝛿 𝐗 𝑖𝑡−5 + 𝜆 𝑡 + 𝜀 𝑖𝑡 X: income; population; sanitation; doctors; female literacy; domestic health expenditure; clean water; initial mortality. Also, time and region dummies.

Measures Health Aid: (1) per capita $; (2) total $; share of GDP Governance: (1) government effectiveness; (2) control of corruption

Government effectiveness “the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.”

Long difference model ∆ 5 𝑀 𝑖𝑡 = 𝛼+ 𝛽 0 𝑀 𝑖𝑡−5 +𝛽 1 𝐿 5 ∆ 5 𝐴𝑖𝑑 𝑖𝑡 + 𝛽 2 𝐿 5 ∆ 5 𝐴𝑖𝑑 𝑖𝑡 ∗ 𝐺𝑜𝑣 𝑖𝑡 𝐴𝑖𝑑 𝑖𝑡 ∗ 𝐺𝑜𝑣 𝑖𝑡 +𝛿 ∆ 5 𝐗 𝑖𝑡 + 𝜆 𝑡 + 𝑣 𝑖𝑡 Griliches & Hausman (1986) First differences not suitable for mortality, as it changes slowly (Angrist & Pischke, 2009 and Allegretto et al., 2017).

Aid and infant mortality, all recipient nations, 1995-2015

Average government effectiveness score, all recipients, 1995-2015

Government effectiveness Infant mortality (per 1000) Decile (1) Government effectiveness score (2) Infant mortality (per 1000) (3) Total health aid ($ million) 1 -1.29 73.39 59.61 2 -0.98 60.87 48.23 3 -0.78 50.31 46.69 4 -0.61 47.13 59.84 5 -0.44 40.67 64.26 6 -0.20 37.50 50.40 7 0.00 31.01 52.85 8 0.34 19.87 28.39 9 0.85 19.31 7.96 10 2.43 8.02 1.62

IV IV strategy motivated by recent work instrumenting aid: Werker et al. (2009); Nunn & Quin (2014); Ahmed (2016); Dreher & Langlotz (2017). Donor government fractionalization interacted with the probability of a country receiving health aid (Dreher & Langlotz 2017).

IV Government fractionalization increases the overall budget of the donor government, which in turn increases the aid budget. Fragmentation in the legislature has a similar effect ( Roubini & Sachs, 1989; Annett, 2001; Dreher & Langlotz, 2017). Political, social and ethnic fragmentation will also tend to increase the size of the government’s overall budget (not always!).

Our identification compares infant mortality in health aid recipient countries by higher donor government fractionalization to lower donor government fractionalization. Causal inference requires the assumption that donor government fractionalization influences infant mortality in recipient countries only through health aid (conditional on the set of control variables).

Zero stage regression 𝐴𝑖𝑑 𝑖𝑗𝑡 = 𝛾 1 𝐷𝐹 𝑗𝑡 ∗ 𝑃 𝑖𝑗 + 𝜆 𝑡 + 𝛼 𝑖 + 𝜀 𝑖𝑡 , Similar logic to: Frankel & Romer (1999); Rajan & Subramanian (2008); Dreher & Langlotz (2017).

IV 𝐴𝑖𝑑 𝑖𝑡−5 = 𝛼+ 𝛽 2 𝐹𝑖𝑡𝑡𝑒𝑑 𝐴𝑖𝑑 𝑖𝑡−5 +𝛿 𝐗 𝑖𝑡−5 + 𝛽 0 𝑀 𝑖𝑡−5 + 𝜆 𝑡 + 𝜀 𝑖𝑡 𝐴𝑖𝑑 𝑖𝑡−5 ∙ 𝐺𝑜𝑣 𝑖𝑡−5 = 𝛼+ 𝛽 2 𝐹𝑖𝑡𝑡𝑒𝑑 𝐴𝑖𝑑 𝑖𝑡−5 ∗ 𝐺𝑜𝑣 𝑖𝑡−5 +𝛿 𝐗 𝑖𝑡−5 + 𝛽 0 𝑀 𝑖𝑡−5 + 𝜆 𝑡 + 𝜀 𝑖𝑡

Baseline results (plain vanilla OLS)  Variables (1) Log aid pc (2) (3) (4) (5) Log total aid (6) Aid/GDP Aid -0.001 (-0.281) -0.005** (-2.143) (-0.533) (-2.104) (-2.056) -7.339*** (-4.333) Governance   -0.068** (-2.357) -0.063* (-1.762) 0.020** (2.460) (2.375) Aid*Governance (-2.160) -0.005* (-1.962) -0.008*** (-3.944) -4.803*** (-3.894)

Long difference (1) Log aid pc (2) (3) (4) (5) Log total aid (6)   (1) Log aid pc (2) (3) (4) (5) Log total aid (6) Aid/GDP Aid -0.006* (-1.807) -0.004 (-0.897) -0.005* (-1.699) -0.002 (-0.519) (-0.561) -10.081*** (-3.016) Governance 0.001 -0.02 -0.003 (-0.072) (-0.066) (-0.699) (-0.121) Aid*Governance 0.003 -0.014*** -7.251** (0.639) (1.432) (-3.005) (-2.579)

First stage regressions   (1) Log aid pc (2) (3) (4) Aid 0.004 (0.678) (0.774) -0.008 (-1.342) -0.016*** (-3.164) Governance (-0.927) -0.620** (-2.484) -0.369** (-2.380) Aid * Governance -0.046** (-2.443) -0.027** (-2.334) First stage regressions Fitted aid 0.710*** (11.78) 0.714*** (11.80) 0.967*** (12.82) 0.955*** (11.24) Fitted aid interaction   0.221** (2.31) 0.446*** (4.05) Kleinberg-Pap rk LM 130.588 (0.000) 130.056 10.497 (0.001) 14.531 Kleinberg-Pap rk Wald F 138.719 139.279 5.364 9.048 Observations 1,068 1,065 744

  (1) Log total aid (2) (3) Aid/GDP (4) Aid -0.001 (-0.172) -0.017*** (-3.196) -5.947* (-1.788) -10.629 (-1.579) Governance 0.013 (1.208) 0.022 (1.629) 0.046** (1.964) 0.033** (2.278) Aid * Governance -0.011*** (-3.330) (-2.656) -15.386** (-2.438) -11.249*** (-4.250)

The marginal effect of health aid on infant mortality conditional on government effectiveness

Robustness: non-health aid   (1) Log aid per capita (2) Log total aid (3) Aid/GDP Aid -0.014** -10.060* (-2.233) (-2.16) (-1.830) Governance -0.266** 0.019 0.044*** (-2.205) (1.25) (2.706) Aid*Governance -0.019** -0.010** -15.490*** (-2.159) (-2.21) (-3.543) Non-health aid*time dummies YES Other controls Kleinberg-Pap rk LM 21.283 (0.000) 78.189 (0.000) 11.661 (0.001) Kleinberg-Pap rk Wald F 19.271 45.002 6.422 Observations 707 724

Robustness: control of corruption   (1) Log aid pc (2) (3) (4) Log total aid (5) (6) Aid/GDP (7) Aid (0.057) 0.125** (2.341) 0.062 (1.352) 0.024*** (2.847) 0.005 (0.503) 64.687 (1.588) 18.451 (1.347) Corruption 0.004 (0.824) -0.488** (-2.378) -0.29 (-1.631) 0.015** (2.557) 0.019*** (2.99) 0.016* (1.915) 0.023*** (2.908) Aid*Corruption -0.036** (-2.364) -0.022* (-1.665) -0.008*** (-4.216) -0.006** (-2.247) -15.969** (-2.114) -9.693*** (-3.315)

The 10 worst governed countries: Somalia, South Sudan, Democratic People's Republic of Korea, Democratic Republic of the Congo, Comoros, Central African Republic, Equatorial Guinea, Myanmar, Togo, and Turkmenistan. average government effectiveness score of -1.674. At sample means, the model predicts a 3% increase in infant mortality (caused by aid) for these poorly governed nations (though p-value = 0.151)

For our sample, we find that only 28% of the recipient-year observations had at least a 3% reduction in infant mortality arising from health aid.

THANK YOU FOR YOUR PATIENCE!