Growth, human development, and trade: The Asian experience

- Economic growth, human development, and trade are central to development policy debates.
- We examine the interdependence of the three variables in a simultaneous equations system.
- We find only unidirectional positive link between human development and economic growth.
- We confirm the success of trade liberalisation in achieving higher growth and human development.

This study looks at the three-way relationship between economic growth, human development, and openness to trade in a large panel of developing Asian economies. Using a theoretically motivated simultaneous equations system, we find that although human development contributes positively to economic growth, in the case of our Asian sample growth does not appear to have had a positive influence on human development. Uneven growth accompanied by lagging institutional development, preventing human capital formation, might have inhibited human development in the short to medium run. Complementary to the literature showing that growth is sustainable only when accompanied by human development, we confirm a role for trade liberalisation policies in achieving higher growth as well as human development.