Analysis of Human Development, Economic Growth and Income Inequality in SAARC Country

Abstract

The Human Development, Income Inequality and Economic Growth are inter-related and this paper highlights the role of Human Development in the development of SAARC’s member states. The paper uses comprehensive measures of Human Development and traces out its impact on Economic Growth using panel data model, estimated by Panel Least Square method. The Hausman Test has been used to decide between the selection of Fixed Effects and Random Effect Model. The period of analysis is from 2000 to 2016. The empirical results show that education affects HDI (Human Development Index) significantly. Moreover, when control of corruption variable is excluded from the equations, the results have been unchanged. On the other hand, Income Inequality and Human Development Index (HDI) are negatively correlated. It means that higher income inequality leads to lower HDI. The impact of HDI on Gini coefficient is positive and significant. It means that HDI increase income inequality. However, health variable do not establish statistically valid relationship with Gini coefficient. The relationship between HDI and growth is negative as the impact of one year lag HDI in GDP growth is negative and statistically significant.