Economic growth & Human development

1. Economic Growth and
Human Development
Group Members
Arsalan Ali Raja
Hassan Khan

2. Introduction
> There is a strong relation between
economic growth and human
development.
> Studies have shown a significant
relationship between economic growth and
human development but in two chains.
> Chain A, economic growth leads to human
development and Chain B, human
development leads to economic growth.

3. Chain A: Economic growth to HD
> In this relation due to good economic growth, public
expenditures on health and education especially on
female would be result in human development.
> When cash income is under control of female, we can
see more expenditures on human inputs i.e. food and
education etc.
> Example, Ghana, India, Indonesia, Pakistan, Philippines,
Malaysia, Nicaragua and Peru indicates that positive
effects of family income to change on child schooling.

4. Chain A: Economic growth to HD (Cont.)
> The significance of public expenditure choice for
improving human development is illustrated by a
comparison between Kenya and Malawi. In 1980s, a
similar proportion of national income went to public
expenditure (27% in Kenya & 30% in Malawi). But Kenya
had a significantly higher social allocation ratio (47%
compared to 35%) and social priority ratio (34%
compared to 14%) so that the proportion of GDP going
directly to human development-improving priorities in
Kenya was over three time that of Malawi (5.1%
compared to 1.5%), which ultimately resulted in better
economic growth in Kenya as compared to Malawi.

5. Chain B, Human development to EG
> It is evident that as people become healthier, better
nourished and educated, they contribute more to
economic growth. Higher human development leads to
enhanced productivity of labor.
> Example: In Cali, Colombia found that a health and
nutrition program increased the lifetime earnings of
individuals to from 2.5 to 8.9 times those of an illiterate
worker.

6. Chain B, Human development to EG (Cont.)
> In agriculture evidence show that educated former are
more likely to use technology and use latest methods
which lead to more productivity.
> For example, in Nepal, the completion of at least seven
years of schooling increased productivity in wheat by
over a quarter, and in rice by 13%.

7. Empirical Findings
> For chain A, the variable chosen for human achievement
were life expectancy and Social expenditure in health
and education for the timeline of 1970 to 1992. For every
percentage point increase in average share of GDP
invested in health and education, the life expectancy
shortfall decreases about 1.75 %.
> Similarly 1% increase in the female primary gross
enrollment rate is estimated to reduce the life
expectancy shortfall by 0.1%.

8. Empirical Findings (Cont.)
> For chain B, the variable chosen were GDP per capita,
level of HD and Gross domestic investment.
> The relationship between HD and economic growth was
stronger the higher investment rate and the more equally
distributed the income.
> Income distribution is apparently more strongly related to
GDP growth when changes as well as levels of human
development.

9. 4 Development Phases: Virtuous, Vicious
and Lop-sided development
> Countries performance can be classified in four
categories. Virtuous, Vicious, HD-lopsided and EG-
lopsided.
> In virtuous condition good human development
enhances growth, which in turn promote human
development. In vicious condition poor human growth
tends to poor growth, which also in result of poor human
development.

10. 4 Development Phases: Virtuous, Vicious
and Lop-sided development (Cont.)
> In HD-lopsided means strong human development and
weak growth. In EG-lopsided means strong growth with
weak human development.
> There are very few countries which remain in virtuous
category. Maximum countries fall under vicious
condition. HD-lopsided is consider good condition to
move into virtuous category. EG-lopsided consider the
dead end. To moving from EG-lopsided to virtuous is
difficult.

11. Thank You
> Questions & Answers.