Paths to Success: The Relationship Between Human Development and Economic Growth

SummaryThis paper explores the two-way relationship between economic growth (EG) and human development (HD). We develop panel data strategies to estimate the strength of these relationships and find that HD plays an essential role in determining growth trajectories (our measure of sustained growth). Not only is HD a final product in the sense that it measures basic human well-being but it is also a critical input into EG. Our findings illustrate the empirical relevance of endogenous growth, and are consistent with threshold effect models. Our results imply that successful policy requires an early focus on HD, not only because of its direct impact but also because of its feedback effect on sustaining EG.