This document summarizes research examining the relationship between economic growth and improvements in human capabilities in India using state-level data. The researcher constructed indices to measure four dimensions of human capability - longevity and health, education, living conditions, and livelihood security. They then analyzed the correlation between per capita GDP in Indian states and each capability dimension. The results showed a positive correlation between GDP and all dimensions, though the correlation was stronger for living conditions and livelihood security and weaker for health and education. Thus, economic growth was found to initiate some improvements in living standards but had a more limited impact on enhancing health and education capabilities.

1. Author: Surajit Deb (University of Delhi, India)
Presenter: Marianna Papakonstantinou
(University of Groningen, The Netherlands)
IARIW 2014, Rotterdam, The Netherlands
Session: Labour Supply and Human Capital
Can Economic Growth Transform into
Human Capabilities in India?

2. Where do we Stand?
 Starting point: Importance of economic growth in poor
countries.
 Poverty reduction.
 Improvements in HDIs (e.g. health, education, social inclusion).
 But, there is also a different view. Capabilities approach:
 Is economic growth sufficient for progress in living conditions?
 Mixed evidence.
 This paper:
 Does economic growth correlate with human capability (e.g.
health, education, living conditions, quality of life)?
 Looking at state-level data in India.

3. Some Facts for India
 High growth and increases in real income (also, at the state-
level).
 But:
 Lagging in terms of social indicators (e.g. schooling, health
care, water, sanitation).
 Ranked 136th (out of 186 countries) in HDI.

4. Research Objectives
 Does economic growth correlate with different dimensions of
human capability?
 Level of analysis: 29 Indian states.
1. Construct 4 human capability dimensions.
a) Longevity and health;
b) Education;
c) Living conditions; and
d) Livelihood security.
2. Construct an aggregate index of human capability (captures
quality of life).
3. Examine the correlation between economic growth and
human capabilities in a cross-sectional framework.

5. More Specifically on the Methods
 Method: Principal Component Analysis.
 Four human capability dimensions.
a) Longevity and health (Mizoram vs. Madhya Pradesh)
e.g. infant mortality; undernourished children.
b) Education (Kerala vs. Arunachal Pradesh)
e.g. literacy rate; school attendance.
c) Living conditions (Mizoram vs. Bihar)
e.g. households living in a concrete house; access to water.
d) Livelihood security (Goa vs. Bihar)
e.g. population below the poverty line; unemployment rate.
 And an aggregate index of human capability.

6. Contribution
 Literature has largely focused on:
 ‘income poverty’
 rather than on ‘capabilities poverty’ (e.g. health, education, living
conditions, livelihood security).
 Expanded index of human capability (compared to HDI).
 Level of disaggregation:
 Correlations not only with an aggregate index of human
capability,
 but also with various dimensions of this index.

7. Results I
 Relationship/Correlation (cross-sectional) between:
 per capita real state domestic product and
 each of the 4 human capability dimensions,
 as well as the aggregate index of human capability.
 Overall, a positive correlation between per capita real SDP
and
 Longevity and health (0.33)
 Education (0.48)
 Living conditions (0.74)
 Livelihood security (0.74)

8. Results II
0
0.2
0.4
0.6
0.8
1
1.2
0 20000 40000 60000 80000 100000 120000
Correlation coefficient: 0.68
Per Capita SDP and Aggregate Index of Human
Capability

9. Summing up
 India experiences high growth and increases in income, but
falls behind in social indicators.
 This paper investigates the link between income and various
dimensions of human capability, looking at 29 Indian states,
and finds…
 A positive link between SDP and all 4 human capability
dimensions.
 Higher for the case of living conditions and livelihood security.
 Lower for the case of health and education.
 Economic growth initiated some improvements in living
conditions and livelihood security, but its role remained
limited in enhancing health and educational capabilities.

10. Points for Discussion
 Interesting work with important, direct policy implications.
 Relevant to other contexts (developing countries).
 The mechanism:
 Economic growth as a facilitator of human capabilities. Time
dimension?
 Where do the differences in the capability indices between states
come from?
 The conclusion is that India cannot fully transform
growth/income into improvements in the quality of life (living
conditions vs. health). What are the reasons for this finding?

11. Points for Discussion
 Causality. Could it be addressed?
 Potential for a panel, instead of a cross-sectional, analysis?
Perhaps through HDIs?
 Descriptives and sensitivity analysis.
 More information on the choice/construction of variables
(e.g. the SDP variable).
 Informative graphs (labeling, statistical significance).

12. Thank you for your Attention!
Any Questions?