International Journal on Recent Trends in Business and Tourism (IJRTBT) ISSN 2550-1526 (Online) Email: info@ijrtbt.org
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6.FACTORS OF HUMAN DEVELOPMENT INDEX IN ASEAN: PANEL COINTEGRATION ANALYSIS
page -
Debesh Bhowmik
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page -
Debesh Bhowmik
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FACTORS OF HUMAN DEVELOPMENT INDEX IN ASEAN: PANEL COINTEGRATION ANALYSIS
Debesh Bhowmik
Indian Economic Association (IEA) & The Indian Econometric Society (TIES), India
Corresponding Author's Email: debeshbhowmik269@gmail.com
ABSTRACT
In this paper, the author tried to relate HDI (Human Development Index) with GDP (Gross Domestic Product), education expenditure, health expenditure and unemployment rate in ASEAN-9 during 1990-2016 with fixed effect on panel regression, Fisher-Johansen cointegration and panel VECM (Vector Error Correction Model) respectively. The author found that one percent increase in GDP, education expenditure, and unemployment rate per year led to 0.105% increase, 0.028% increase and 0.027% decrease in HDI per year significantly and one percent increase in health expenditure led to 0.0124% increase in HDI insignificantly in ASEAN (Association of Southeast Asian Nations) during 1990-2016. Panel cointegration suggested that there are three cointegrating equations in which two are moving towards equilibrium. In panel VECM, it was found that-
- There is significant long run association among health expenditure percentage of GDP and unemployment rate on the Human Development Index (HDI) of the ASEAN during 1990-2016.
- There is significant long run association among health expenditure percentage of GDP and unemployment rate on the educational expenditure % of GDP of the ASEAN during 1990-2016.
- There is also a significant short run association among education expenditure on GDP, from HDI on education expenditure and from GDP on unemployment rate of ASEAN during 1990-2016.
Keywords: Human Development Index, Gross Domestic Product, Fixed Effect Regression, Panel Cointegration, Panel Vector Error Correction
INTRODUCTION
ASEAN is one of the leading regional trading blocs in Asia as well as in the world, but majority of its members are facing low GDP per capita and HDI value. Poverty and unemployment problems of ASEAN are randomly hampering the development process where both physical and human capital is suffering. Human capital as a function of growth through improvement in education and skill development and with high productivity should be a great concern in the ASEAN region. Human competitiveness index of ASEAN region is not satisfactory in the world economy. Even in the era of globalization and liberalization the human development factor is not given prior importance. The indicators of human development were not properly nourished. Therefore, the transformation of the economy through human development was underutilized. ASEAN as a single market for the goods, services, investment, skilled labor, free capital flows in accelerating economic integration process, intra and inter-competitiveness of human skill and productivity through human development. It is necessary because Lucas (1988) in his endogenous growth theory emphasized investment in human capital more directly and linked it to long term rates of economic growth. Sen (1999) argued that standard of living of a society should be judged not by the average level of income but by people’s capabilities to lead the life they value. On the one hand, economic growth provides the resources to permit sustained improvement in human development. On the other hand, sustained improvement in the quality of human capital is an important contribution to economic growth.
CONCLUSION
The paper concludes that fixed effect panel regression showed one percent increase in GDP, education expenditure, and unemployment rate per year led to 0.105% increase, 0.028% increase and 0.027% decrease in HDI per year significantly and one percent increase in health expenditure led to 0.0124% increase in HDI insignificantly in ASEAN during 1990-2016. Panel cointegration suggested that there are three cointegrating equations in which two are moving towards equilibrium. In panel VECM, it was found that [i] There is significant long run association among health expenditure percentage of GDP and unemployment rate on the human development index of the ASEAN during 1990-2016. [ii] There is significant long run association among health expenditure percentage of GDP and unemployment rate on the education expenditure percentage of GDP of the ASEAN during 1990-2016. [iii] There is significant short run association among education expenditure on GDP, from HDI on education expenditure and from GDP on unemployment rate of ASEAN during 1990-2016.
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