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Determinants of Human Development: Insights from State-Dependent Panel Models

Michael Binder () and Georgios Georgiadis
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Michael Binder: Graduate School of Economics, Finance, and Management at Goethe University, Johannes Gutenberg University Mainz and Technical University Darmstadt and the Center for Financial Studies

No HDRP-2010-24, Human Development Research Papers (2009 to present) from Human Development Report Office (HDRO), United Nations Development Programme (UNDP)

Abstract: In this paper, we study economic development in a panel of 84 countries from 1970 to 2005. We focus on characterizing heterogeneities in the development effects of macroeconomic policies and on comparing the development process as measured by GDP to that measured by the Human Development Index (HDI). We do so within a novel dynamic panel modelling framework that can account for crucial aspects of both the cross-sectional and intertemporal features of the observed process of economic development, and that can capture the dependence of the development effects of macroeconomic policies on differences in countries' persistent characteristics, such as their social norms and institutions. Among our findings are that macroeconomic policies affect economic development with less delay than suggested by conventional econometric frameworks, yet impact HDI with longer delay and overall less strongly than GDP. Differences in countries' persistent characteristics may even affect the sign of the long-run development effects of a given macroeconomic policy: Fiscal stimuli in the form of government consumption positively affect GDP in countries with low institutional quality, but negatively affect long-run GDP in countries with high institutional quality.

Keywords: human development; institutions and social norms; dynamic panel modelling. (search for similar items in EconPapers)
JEL-codes: C23 O10 O15 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2010-09
New Economics Papers: this item is included in nep-hap and nep-hrm
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Published as background research for the 2010 Human Development Report.

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