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A MODIFIED HUMAN DEVELOPMENT INDEX, DEMOCRACY AND ECONOMIC GROWTH IN INDONESIA
Corresponding Author(s) : Erly Leiwakabessy
Humanities & Social Sciences Reviews,
Vol. 8 No. 2 (2020): March
Abstract
Purpose of the study: Firstly, to construct a modified human development index by incorporating new dimensions (democracy and employment). Secondly, to measure and compare human development progress in Indonesian provinces. Thirdly, to examine the nexus between human development, economic growth, and democracy during the period 2010-2017.
Methodology: Principle Component Analysis (PCA) method is employed to combining components into one index (composite index) which we call MHDI. The panel simultaneous equation model is applied to examine the nexus between human development, economic growth, and democracy.
Main Findings: There were significant ranking differences between MHDI and HDI-UNDP in 24 provinces of 33 Indonesian provinces. The most significant ranking differences were found in several provinces, especially Maluku, West Java, Central Java, East Java, and Central Kalimantan. The study found a strong two-way relationship between human development and economic growth as well as between human development and democracy.
Applications of this study: This study recommends that human development policies supported by rapid economic growth and democratic stability should be one of the development priorities through government spending and support from private investment (the private sector) which focuses on the development of education and health infrastructure throughout the Indonesian province.
Novelty/Originality of this study: This study employs different methods for constructing a human development index by incorporating a new dimension (democracy and employment).
Keywords
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- Alvan, A. (2007). Forging a link between human development and income inequality: cross-country evidence. Review of Social, Economic & Business Studies. 7(8): 31-43.
- Amaluddin, A., Laitupa A.A, Payapo, R.W, & Serang M.R. (2018). A modified human development index and poverty in the villages of West Seram Regency, Maluku province, Indonesia. International Journal of Economics and Financial Issues. 8(2), 325-330.
- Annaka, S.,& Higashijima, M. (2017). Democratization and human development. WINPEC Working paper seriesNo.E1712.
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- Bandara A., Dehejia, R. & Lavie-Rouse S. (2014). The nexus between human development and growth. THDR 2014, Background Paper No. 4 . ESRF Discussion paper No.58.
- Despotis, D. K. (2005). A reassessment of the human development index via data envelopment analysis. Journal of the Operational Research Society, 56(8), 969–980. https://doi.org/10.1057/palgrave.jors.2601927 DOI: https://doi.org/10.1057/palgrave.jors.2601927
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References
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Akram, N., Padda I.H & Khan M. (2008). The long term impact of health on economic growth in Pakistan, The Pakistan Development Review, 47 (4), 487-500. https://doi.org/10.30541/v47i4iipp.487-500 DOI: https://doi.org/10.30541/v47i4IIpp.487-500
Al-Hilani, H. (2012). HDI as a measure of human development: a better index than the income approach? IOSR Journal of Business and Management. 2(5), 24-28. https://doi.org/10.9790/487x-0252428 DOI: https://doi.org/10.9790/487X-0252428
Alvan, A. (2007). Forging a link between human development and income inequality: cross-country evidence. Review of Social, Economic & Business Studies. 7(8): 31-43.
Amaluddin, A., Laitupa A.A, Payapo, R.W, & Serang M.R. (2018). A modified human development index and poverty in the villages of West Seram Regency, Maluku province, Indonesia. International Journal of Economics and Financial Issues. 8(2), 325-330.
Annaka, S.,& Higashijima, M. (2017). Democratization and human development. WINPEC Working paper seriesNo.E1712.
Arisman, A. (2018). Determinant of human development index in ASEAN countries.Signifikan: Jurnal Ilmu Ekonomi,7(1), 113–122. https://doi.org/10.15408/sjie.v7i1.6756 DOI: https://doi.org/10.15408/sjie.v7i1.6756
Asmita, Fitrawaty & Ruslan D. (2017). Analysis of factors affecting the human development index in north sumatra province. IOSR Journal of Business and Management, 19 (10), 27-36. https://doi.org/10.9790/487X-1910072736
Ayasrah, T.M.M. (2012). The Social economic development index: A new measurement of development. Jurnal Ekonomi Malaysia, 46 (2), 37-53.
Babiarz, P., Migała-Warchoł, G & Szczygieł E. (2018). The application of customized human development index to the analysis of socio-economic development of the European Union member states. Economics & Sociology 11(4): 332-342. https://doi.org/10.14254/2071-789X.2018/11-4/22 DOI: https://doi.org/10.14254/2071-789X.2018/11-4/22
Baldacci, E., Clements, B. Gupta S. & Cui Q. (2008). Social spending, human capital, and growth in developing countries. World Development, 36, 1317-1341. https://doi.org/10.1016/j.worlddev.2007.08.003 DOI: https://doi.org/10.1016/j.worlddev.2007.08.003
Baltagi, B.H. (2005). Econometric analysis of panel data. John Wiley & Sons. New York.
Bandara A., Dehejia, R. & Lavie-Rouse S. (2014). The nexus between human development and growth. THDR 2014, Background Paper No. 4 . ESRF Discussion paper No.58.
Despotis, D. K. (2005). A reassessment of the human development index via data envelopment analysis. Journal of the Operational Research Society, 56(8), 969–980. https://doi.org/10.1057/palgrave.jors.2601927 DOI: https://doi.org/10.1057/palgrave.jors.2601927
Field, A. (2013). Discovering statistics using IBM SPSS statistics. Fourth edition. Sage publication.
Gerring, J., Thacker, S. C., & Alfaro, R. (2012). Democracy and human development. Journal of Politics, 74(1), 1–17. https://doi.org/10.1017/S0022381611001113 DOI: https://doi.org/10.1017/S0022381611001113
Ghosh, M. (2006). Economic growth and human development in Indian states. Economic and Political Weekly, 41(30), 3321–3329. https://doi.org/10.2307/4418499
Grimm, M., Harttgen, K., Klasen, S., Misselhorn, M., Munzi, T., & Smeeding, T. (2010). Inequality in human development: An empirical assessment of 32 countries. Social Indicators Research, 97(2), 191–211. https://doi.org/10.1007/s11205-009-9497-7 DOI: https://doi.org/10.1007/s11205-009-9497-7
Gujarati, D. & Porter, D.C. (2009). Basic Econometrics. Fifth Edition. Mc. Graw Hill Companies, New York
Hanushek, E. & Kimko D. (2000). Schooling, Labor Force Quality and the Growth of Nations. American Economic Review 90, 1184-1208. https://doi.org/10.1257/aer.90.5.1184 DOI: https://doi.org/10.1257/aer.90.5.1184
Klomp J. & Haan J. (2013). Political regime and human capital: A cross-country analysis. Social Indicator Research 111: 45–73. https://doi.org/10.1007/s11205-011-9983-6 DOI: https://doi.org/10.1007/s11205-011-9983-6
Knutsen, C. H. (2011). Which democracies prosper? Electoral rules, form of government and economic growth. Electoral Studies, 30(1), 83–90. https://doi.org/10.1016/j.electstud.2010.09.006 DOI: https://doi.org/10.1016/j.electstud.2010.09.006
Korkmaz, S., & Korkmaz, O. (2017). The relationship between labor productivity and economic growth in OECD Countries. International Journal of Economics and Finance, 9(5), 71. https://doi.org/10.5539/ijef.v9n5p71 DOI: https://doi.org/10.5539/ijef.v9n5p71
Kovacevic, M. (2010). Review of HDI critiques and potential improvements. Human development research paper 2010/33, United Nations Development Programme.
Krishnan, V. (2010). constructing an area-based socioeconomic index: A principal components analysis approach. Early Child Development Mapping Project (ECMAP). Community-University Partnership (CUP). Faculty of Extension, University of Alberta.
Lawal , N. A. and Wahab, T. . I. (2011). Education and economic growth : The Nigerian experience. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 2(3), 225–231.
Lindman, C., & Sellin, J. (2011). The use of principal component analysis in creating an environmental index. Bachelor Thesis. Department of Statistics, Uppsala University
Mahajan, S.K, Das S. & Dutt S. (2012). An alternative measure to examine variation in achievement of human development among selected states of India: Use of varimax rotated principal component analysis. Journal Of Human Development4 (1), 35-48.
Makuyana, G., & Odhiambo, N. M. (2017). Public and private investment and economic growth in Zimbabwe: An empirical test. Business and Economic Horizons, 13(1), 60–76. https://doi.org/10.15208/beh.2017.05 DOI: https://doi.org/10.15208/beh.2017.05
McGillivray, M. (2005). Measuring non-economic well-being achievement. Review of Income and Wealth, 51(2), 337–364. https://doi.org/10.1111/j.1475-.2005.00157.x
Migala-Warchol, A. (2019). School Attachment and Video Game Addiction of Adolescents with Divorced vs. Married Parents. Turkish Online Journal of Educational Technology - TOJET, 18(2), 107–115.
Mishra, S., & Nathan, H. S. K. (2018). A Manush or Humans Characterisation of the Human Development Index. Journal of Human Development and Capabilities, 19(3), 398–415. https://doi.org/10.1080/19452829.2017.1422703 DOI: https://doi.org/10.1080/19452829.2017.1422703
Rachdi, H., & Saidi, H. (2015). Democracy and Economic Growth: Evidence in MENA Countries. Procedia - Social and Behavioral Sciences, 191, 616–621. https://doi.org/10.1016/j.sbspro.2015.04.644 DOI: https://doi.org/10.1016/j.sbspro.2015.04.644
Ranis, G., Stewart, F., & Ramirez, A. (2000). Economic growth and human development. World Development, 28(2), 197–219. https://doi.org/10.1016/S0305-750X(99)00131-X DOI: https://doi.org/10.1016/S0305-750X(99)00131-X
Ranis, G., Stewart, F., Samman, E. (2006). Human development: Beyond the human development index. Journal of Human Development 7(3), 323-358. DOI: https://doi.org/10.1080/14649880600815917
Reza, A. (2012). Impact of education on economic growth of Pakistan, Econometric analysis. IOSR Journal of Business and Management, 5(4), 20–27. https://doi.org/10.9790/487x-0542027 DOI: https://doi.org/10.9790/487X-0542027
Rock, M. T. (2009). Has democracy slowed growth in Asia? World Development, 37(5), 941–952. https://doi.org/10.1016/j.worlddev.2008.09.002 DOI: https://doi.org/10.1016/j.worlddev.2008.09.002
Saha, S., & Zhang, Z. (2017). Democracy-growth nexus and its interaction effect on human development: A cross-national analysis. Economic Modelling, 63, 304–310. https://doi.org/10.1016/j.econmod.2017.02.021 DOI: https://doi.org/10.1016/j.econmod.2017.02.021
Sahoo, P., Dash R.K & Nataraj, G. (2010). Infrastructure development and economic growth in China. Ide Discussion Paper No. 261. Institute Developing Economies.
Sala-i-Martin, X., Doppelhofer, G., & Miller, R. I. (2004, September). Determinants of long-term growth: A bayesian averaging of classical estimates (BACE) approach. American EconomicReview. https://doi.org/10.1257/0002828042002570 DOI: https://doi.org/10.1257/0002828042002570
Salas-Bourgoin, M. A. (2014). A proposal for a modified human development index. CEPAL Review, 2014(112), 29–44. https://doi.org/10.18356/ea3f94ea-en DOI: https://doi.org/10.18356/ea3f94ea-en
Săndica, A. M., Dudian, M., & Ştefănescu, A. (2018). Air pollution and human development in Europe: A new index using principal component analysis. Sustainability (Switzerland), 10(2). https://doi.org/10.3390/su10020312 DOI: https://doi.org/10.3390/su10020312
Sangaji, J. (2016). The Determinants of human development index in Several Buddhist Countries. Journal of BuddhistEducation and Research, 2 (1), 48-60.
Santhirasegaram, S. (2007). The impact of democratic and economic freedom on economic growth in developing countries: Pooled cross country data evidence. Journal of Applied Sciences, 7(11), 1484–1489. https://doi.org/10.3923/jas.2007.1484.1489 DOI: https://doi.org/10.3923/jas.2007.1484.1489
Silva, R, and Ferreira-Lopez, A.(2014).A Regional Development Index for Portugal. Social Indicators Research, 118(3), 1055–1085. https://doi.org/10.1007/s11205-013-0455-z DOI: https://doi.org/10.1007/s11205-013-0455-z
Stanton, E. A. (2007). Human Development Index: A History. Political Economy Research Institute Working Paper Series, 127(February), 1–36.
Suri, T., Boozer, M. A., Ranis, G., & Stewart, F. (2011). Paths to success: The relationship between human development and economic growth. World Development, 39(4), 506–522. https://doi.org/10.1016/j.worlddev.2010.08.020 DOI: https://doi.org/10.1016/j.worlddev.2010.08.020
Tabachnick, B. G., &Fidell, L. S. (2007). Using Multivariate Statistics (5th ed.). New York: Allyn and Bacon.
Tavares, J., &Wacziarg, R. (2001). How democracy affects growth. European Economic Review, 45(8), 1341–1378. https://doi.org/10.1016/S0014-2921(00)00093-3 DOI: https://doi.org/10.1016/S0014-2921(00)00093-3
Trunajaya, I.P. (2015). The factors affecting the human development index in the whole province of indonesia (faktor-faktor yang mempengaruhi indeks pembangunan manusia di seluruh provinsi Indonesia). Thesis. Economics Department of Economic and Management Faculty. Bogor Agricultural University.
Tsamadias, C., & Prontzas, P. (2012). The effect of education on economic growth in Greece over the 1960-2000 period. Education Economics, 20(5), 522–537. https://doi.org/10.1080/09645292.2011.557906 DOI: https://doi.org/10.1080/09645292.2011.557906
Todaro, M., & Smith, S. C. (2015). Economic development (12th ed.). Prentice Hall. Retrieved from https://b-ok.cc/book/1183021/c59931
Van den Berg, H. (2012). Economic growth and development, second edition. Economic Growth and Development, Second Edition (pp. 1–859). World Scientific Publishing Co. https://doi.org/10.1142/9789814374651
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