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Journal ArticleDOI

Paths to Success: The Relationship Between Human Development and Economic Growth

TL;DR: In this paper, the authors explored the relationship between economic growth and human development and found that HD plays an essential role in determining growth trajectories (our measure of sustained growth), and that HD is a final product in the sense that it measures basic human well-being but it is also a critical input into economic growth.
About: This article is published in World Development.The article was published on 2011-04-01 and is currently open access. It has received 163 citations till now. The article focuses on the topics: Endogenous growth theory.

Summary (2 min read)

1 Introduction

  • Since Human Development (HD), which has been defined as enlarging people’s choices in a way which enables them to lead longer, healthier and fuller lives, has come to the fore as a fundamental objective of development3, its relationship to Economic Growth (EG) has become a central issue.
  • This is not just a matter of how the two relate at a particular point in time, but also addressed the question of sequencing over time, which has major relevance to policy.
  • This dual causation between HD and EG was first explored empirically by RSR.
  • In Section Three the authors review the relevant theoretical development and growth literature.
  • Five presents a country-specific measure of the overall strength of Chain A and explores its determinants.

2 Summary and Update of Previous Findings

  • The authors first review and update the evidence and concepts in RSR on which this paper builds.
  • While EG is thus an important element in improving HD, the relationship is not automatic but depends on the distribution of income and the propensities of 3 households and governments to prioritize HD in their expenditures.
  • The authors 6While the shortfall reduction is a standard measure in the literature, they recognize that the presence of measurement error can be exaggerated by the use of the shortfall as values near the boundary.
  • Both Figure 3 and Table 1 show a strong tendency for countries in the vicious cycle to remain there, with only 5 countries that were in the vicious quadrant in the 1960’s exiting it by the end of the sample period, 4 into HD-lopsided and 1 into EGlopsided.
  • Lucas’ reflections on the alternative sources of sustained growth from 1960 era models showed how countries could grow at different rates indefinitely, depending on their human capital.

In the case of Chain A, data availability, over time, is more limited than in the case of Chain B, permit-

  • 20 IMSR has the virtue that the lag time from initial growth until the improvements in HD are realized is likely quite short as compared to other aspects of HD.
  • The country differences in the relative strength of Chain A are due to a variety of structural and policy factors which determine the efficiency with which GDP resources are converted into HD outcomes.
  • The results are presented in Table 5, which uses the combined index for the strength of Chain A.
  • Due to the collinearity between public expenditure per capita on education and health the authors report regression specifications on them separately.

6 The Virtuous, The Vicious, and the Lopsided: Implications

  • The authors are now in a position to consider how the two chains reinforce each other in generating vicious and virtuous outcomes, or which lead to short-run lopsided outcomes when one chain is comparatively stronger than the other.
  • Furthermore, their sequencing analysis indicates that HD is not a substitutable factor, like capital and labor in a neoclassical framework, but behaves more like a necessary precondition for sustained growth, as in the Azariadis-Drazen threshold externality framework.
  • INSERT FIGURE 12 Figure 12 therefore shows the strengths of the two Chains over the sample period.
  • On the other side, the authors can see countries like Pakistan, Nigeria, Chad, and Burundi that tend to score low on both their measures and whom they therefore expect to perform poorly over the long-run unless there is a change in their HD priorities.

7 Conclusion

  • The aim of this paper has been to understand the two-way linkages between HD and EG, accounting for the fact that HD is likely to be not just an end product of growth, but an input as well and a key ingredient in the development process.
  • In this case their aim was to explore individual country EG and HD 24 performance.
  • In the case of HD, the relative strength of Chain A for each country was defined by the deviations from the overall cross-country relationship between early average economic growth and later improvements in HD.
  • These sequencing and level effects of HD contradict the usual neoclassical view whereby all inputs to production are substitutable.
  • The findings of long-run differences in growth paths, not only across countries but also within a given country over time, restrict the class of theoretical models that can explain such phenomena.

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Citations
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TL;DR: A literature review on the research works that have used the data envelopment analysis (DEA) to measure and analyze the development process and the main gaps in each analysis dimension were assessed to guide future researches.
Abstract: Given the importance the concept of productive efficiency has on analyzing the human development process, which is complex and multidimensional, this study conducts a literature review on the research works that have used the data envelopment analysis (DEA) to measure and analyze the development process. Therefore, we researched the databases of Scopus and Web of Science, and considered the following analysis dimensions: bibliometrics, scope, DEA models and extensions used, interfaces with other techniques, units analyzed and depth of analysis. In addition to a brief summary, the main gaps in each analysis dimension were assessed, which may serve to guide future researches.

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TL;DR: Using econometric methods which can solve the problem of cross-sectional dependence and heterogeneity of slope such as CIPS and CADF unit root tests, LM bootstrap panel cointegration test, Continuously-Updated Fully-Modified (CUP-FM) estimators, and Dumitrescu-Hurlin panel causality test, the authors reveal that biomass energy usage increase human development in BRICS countries and bidirectional causality exists between these two variables.

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References
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Frequently Asked Questions (1)
Q1. What are the contributions in "Paths to success: the relationship between human development and economic growth" ?

This paper explores the two-way relationships between Economic Growth ( EG ) and Human Development ( HD ), building on an earlier work by Ranis, Stewart, and Ramirez ( 2000 ). Here, the authors show that HD is not only a product of EG but also an important input to it. The paper develops new empirical strategies to estimate the strength of the two-way chains connecting HD and EG. Building on existing growth literature, the authors explore the empirical determinants of positive growth trajectories running from HD to EG and find that HD plays an essential role in explaining growth trajectories.