CHAPTER - VI DETERMINANTS OF HUMAN...

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CHAPTER - VI

DETERMINANTS OF HUMAN DEVELOPMENT

The objective of this chapter is to analyze the contribution of different factors affecting levels

of human development. The multiple regression analysis technique has been applied to find whether

the effect of different factors differ significantly between the countries. The analysis has been done

for 79 countries for which the data were available. Further countries have been divided into four

groups based on World Bank classification. Group-I contains nineteen high income countries.

Group-II contains twenty high middle income countries. Group-III has twenty countries with low

middle income and Group-IV contains twenty countries with very low income. The analysis has

been carried out at three points of time viz for the years 1985, 1995 and 2005. The purpose behind

this was to study the changes over a long period of time. The chapter has been divided into four

sections. Section-I deals with the analysis of determinants of human development in respect of all

countries. Section-II deals with the analysis of determinants of human development for different

group of countries based on World Bank classification. In section-III analysis of the determinants of

human development in the developing countries have been taken up. The whole discussion has been

concluded in Section-IV.

SECTION - I

Determinants of Human Development:

In this section analysis has been done to study the contribution of different factors affecting

different levels of human development. Human Development Index (HDI) has been used as a proxy

for human development. The analysis has been undertaken to find the relationship of HDI with per

capita income (PPP), gross domestic saving, health expenditure in terms of GDP percentage, and

education expenditure in terms of GDP percentage, labour force as a percent of total population,

urban population as a percent of total population, share of non agriculture sector as a percent of GDP

and percentage of labour force in non agriculture sector.

All Countries Analysis: 1985

The results of the cross country regression analysis for all countries taken together for the

year 1985 are presented in table 6.1. The table shows that 82 percent variations in the dependent

variable are explained by the eight factors under study. The coefficient of per capita income and

percentage of labour force in non agriculture sector are positive and significant at 1 percent level of

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significance. The effect of gross domestic saving and health expenditure are positive and significant

at 10 percent level of significance. The effect of coefficient of urban population is negative and

significant at ten percent level of significance.

Table - 6.1

Cross Country Regression Results for the year 1985: All Country Analysis

HDI Dependent Variable Regression

Coefficients

t-ratios

Per Capita Income PPP .118 3.655*

Gross Domestic Saving .011 1.712***

Health Expenditure as a percent of GDP .050 1.507***

Education Expenditure as a percent of GDP .006 .175

Labour force as a percent of total population .005 .085

Urban population as a percent of total population -.159 -1.573***

Share of Non Agriculture sector as a percent of

GDP

.421 1.164

Percentage of Labour Force in Non Agriculture

sector

.515 4.161*

Constant -2.921 -5.336

R2 .838

2

R .820

Note: * Significant at 1%

** Significant at 5%

*** Significant at 10%

This can be attributed to the facts that increase in urbanization increases the cost of

sustenance thereby reducing the capability to deploy suitable funds for education and health.

Migration of people from rural to urban areas results in slums which further reduces the human

development level. Gross domestic saving has direct effect on human development and its value of

coefficient is .011 indicating that if there is one percent increase in gross domestic saving the human

development will increase by .011 percent. This is due to the fact that increase in saving will

increase the income of the inhabitants through increased investments which may help the population

to have the capacity to acquire the facilities which are adding to the development of human resource

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and thus increase in human development level. The coefficient of share of non agriculture sector as

a percent of GDP turns out to be positive but insignificant.

All Country Analysis: 1995

The cross country regression results for all countries taken together for the year 1995 are

presented in the table 6.2. The table reveals that 86.5 percent variations are explained by the

explanatory variables under consideration. The coefficient of per capita income, share of non

agriculture sector as a percent of GDP and percentage of labour force in non agriculture sector are

positive and significant at 1 percent level of significance. The coefficient of health expenditure in

terms of GDP percentage is positive whereas that of urban population as a percent of total population

is negative and both are significant at ten percent level of significance. The coefficient of education

expenditure as percent of GDP is negative but non-significant. The coefficient of health expenditure

is .05 indicating that if there is one percent increase in the health expenditure, the human

development will increase by .05 percent. The coefficient of share of non agriculture sector as a

percent of GDP and labour force in non agriculture sector is positive and highly significant meaning

thereby that increase in these factors will result into increase in income and hence better opportunity

for education and better health facilities thus raising the human development level.

Table - 6.2 Cross Country Regression Results for the year 1995: All Country Analysis


Coefficients

t-ratios


Gross Domestic Saving .004 .805


Education Expenditure as a percent of GDP -.003 -.087

Labour force as a percent of total population -.019 -.224



GDP

1.103 3.206*


sector

.362 3.779*

Constant -3.840 -6.068

R2 .879

2

R .865




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All Countries Analysis: 2005

The cross country regression results for all countries for the year 2005 are presented in the

table 6.3. It is clear from the table that 91.7 percent variations are explained by eight explanatory

variables under study. The coefficients of per capita income (PPP), share of non agriculture sector

as a percent of GDP and percentage of labour force in non-agriculture sectors are substantially

positive at one percent level of significance. The coefficient of labour force as a percent of total

population is positive and that of urban population as a percent of total population is negative and

both are significant at 10 percent level of significance. The coefficient of remaining variables like

gross domestic saving, health expenditure, education expenditure are positive but non significant.

The study found that the value of R2 and 2

R which was 83.8% and 82% respectively in the

year 1985 has increased to 87.9% and 86.5 percent respectively in 1995. These further increased to

92.6 and 91.7 percent in 2005. This indicates that the effect of the explanatory variables on the

dependent variable have increased over the period of time. The per capita income continues to be

positive and highly significant throughout the study period. The coefficient of gross domestic saving

was significant in the year 1985 but it became insignificant in the year 1995 and 2005 though

remained positive.

The coefficient of health expenditure has remained significant upto the year 1995 and in the

2005 it became insignificant though remained positive. The coefficient of urban population as a

percent of total population has also remained negative and significant throughout the study period.

The coefficient of share of non agriculture sector as a percent of GDP was non significant in the year

1985 but it became significant in the year 1995 as well as 2005.

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Table - 6.3

Cross Country Regression Results for the year 2005: All Country Analysis


Coefficients

t-ratios



Health Expenditure as a percent of GDP .028 1.003


Labour force as a percent of total population .066 1.889**

Urban population as a percent of total population -.229 -2.881**


GDP

.668 3.095*


sector

.466 5.445*

Constant -3.452 -9.574

R2 .926

2

R .917




SECTION - II

In this section analysis of the determinants of human development for different groups of

countries based on World Bank classification has been undertaken.

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High Income Countries: 1985

The results of cross country regression analysis for Group-I i.e. High Income countries for

the year 1985 are presented in the table 6.4. The table reveals that 81 percent variations in the

dependent variable are explained by eight explanatory variables under consideration. The

coefficient of education expenditure is positive and significant at one percent level of significance.

This implies that as the expenditure on education is increased more trained and skilled workers are

produced who will work and earn better and their standard of living will increase which ultimately

lead to enhancement in the human development level.

Table - 6.4

Cross Country Regression Results for the year 1985: Group- I High Income Counties


Coefficients

t-ratios

Per Capita Income PPP .035 1.310


Health Expenditure as a percent of GDP .074 .469

Education Expenditure as a percent of GDP .022 1.564*


Urban population as a percent of total population -.019 -.413


GDP

-2.257 -.243


sector

.700 -1.948**

Constant 2.415 3.13

R2 .894

2

R .810




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The coefficient of labour force is negative and significant at five percent level of

significance. The coefficient of urban population is also negative but is non significant. The

coefficients of per capita income, gross domestic saving, health expenditure, labour force are

positive but non significant.


The results of the regression analysis for the group-I for the year 1995 are presented in the

table 6.5. Table shows that 87.6 percent variations in the dependent variable are explained by the

explanatory variables under study. The coefficient of per capita income is positive and significant at

1 percent level of significance. The coefficient of gross domestic saving and share of non

agriculture sector as a percent of GDP are negative but insignificant. The coefficients of health

expenditure, education expenditure, labour force, urban population, labour force in non agricultural

sector are positive but non significant.

Table - 6.5

Cross Country Regression Results for the year 1995: Group I High Income Countries


Coefficients

t-ratios


Gross Domestic Saving -.011 -.280




Urban population as a percent of total population .040 .427

Share of Non Agriculture sector as a percent of GDP -1.892 -1.353

Percentage of Labour Force in Non Agriculture sector .235 1.096

Constant 1.602 .615

R2 .931

2

R .876




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The results of the cross country regression analysis of group-I countries for the year 2005 are

presented in the table 6.6. Table shows that 91 percent variations in the dependent variable are

explained by set of 8 explanatory variables under study. The coefficients of Per Capita Income

(PPP) and health expenditure are positive and significant at one percent level of significance. The

coefficient of labour force as a percent of total population and urban population as a percent of total

population is positive and significant at 5 percent level of significance. The coefficient of gross

domestic saving, share of non agriculture sector as a percent of GDP is positive but non significant.

The coefficient of education expenditure as a percent of GDP and percentage of labour force in non

agriculture sector are negative and insignificant.

The study found that over the period from 1985 to 1995 the value of 2

R increased from 81

percent to 87.6 percent and further it increased to 91 percent in 2005. The coefficient of per capita

income was positively insignificant in the year 1985 but it became highly significant in 1995 and

2005. The education expenditure was positive and significant in the year 1985 but it became

insignificant but positive in 1995 and in 2005 its coefficient become negative but non significant.

The coefficient of urban population was negative in the year 1985 but it became positive in the year

1995 and 2005. The share of non agriculture sector as a percent of GDP was negative in the year

1985 and 1995 but became positive in the year 2005. The coefficient of health expenditure was

positive but insignificant in the year 1985 and 1995 but became significant in 2005.

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Table - 6.6

Cross Country Regression Results for the year 2005: Group I High Income Countries


Coefficients

t-ratios



Health Expenditure as a percent of GDP .072 3.592*



Urban population as a percent of total population .227 2.041**

Share of Non Agriculture sector as a percent of GDP .115 .264

Percentage of Labour Force in Non Agriculture sector -.138 -.874

Constant -1.744 -1.906

R2 .951

2

R .911




Upper Middle Income Countries: 1985

The result of cross country regression analysis for Upper Middle Income countries (Group-II)

for the year 1985 are presented in the table 6.7. The results of the regression analysis show that only

39 percent variations in the dependent variable are explained by the factors under consideration. The

coefficients of gross domestic saving, labour force as a percent of total population and labour force

in non agriculture sector are positive and that of education expenditure is negative and all are

significant at 10 percent level of significance.

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Table - 6.7

Cross Country Regression Results for the year 1985: Group II Upper Middle Income

Countries

HDI Dependent Variable` Regression

Coefficients

T-ratios

Per Capita Income PPP .033 .432

Gross Domestic Saving .012 1.9000**

Health Expenditure as a percent of GDP -.020 -.515

Education Expenditure as a percent of GDP -.091 -2.264**



Share of Non Agriculture sector as a percent of GDP .562 1.237

Percentage of Labour Force in Non Agriculture sector .635 2.633**

Constant -3.416 -3.678

R2 .647

2

R .390




The coefficient of per capita income, labour force as a percent of total population, share of

non agriculture sector are positive but non significant. The coefficient of urban population is

negative but insignificant.


The result of the regression analysis for group-II countries for the year 1995 are presented in

the table 6.8. It is clear from the table that only 24 percent variations in the dependent variable are

explained by the explanatory variables under consideration. The coefficients of labour force as a

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percent of total population is positive and significant at ten percent level of significance. The

coefficient of per capita income, gross domestic saving, health expenditure, education expenditure

and labour force in non agriculture sector are positive but non significant. The coefficient of urban

population and share of non agriculture sector is negative but non significant.

Table - 6.8


Countries


Coefficients

t-ratios





Labour force as a percent of total population .138 1.397***


Share of Non Agriculture sector as a percent of GDP -.345 -.441


Constant -1.280 -.958

R2 .446

2

R .244




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The results of the cross country regression analysis for Group-II countries for the year 2005

are presented in the table 6.9. The results of the regression analysis show that 48.6 percent

variations in the dependent variable are explained by the set of eight explanatory variables under

study. The coefficient of per capita income is significant at 1 percent level of significance. The

coefficient of labour force as a percent of total population is positively significant at 10 percent level

of significance. The coefficient of gross domestic saving, health expenditure, education expenditure

and labour force in non-agriculture sector is positive but non significant. The coefficient of urban

population and share of non-agriculture sector is negative but non significant. The coefficient of

health expenditure is .034 meaning thereby that if there is one percent increase in the health

expenditure the human development index will increase by .034 percent. The coefficient of labour

force in non-agriculture sector is .170 meaning thereby that if there is increase of 1 percent in non-

agriculture labour force the human development index will increase by .170 percent.

The study found that over a period of time from 1985 to 1995 the value of 2

R has decreased

from 39 percent to 24.4 and it increased over the period from 1995 to 2005 to the value of 48.6. It

shows that explanatory variable affect the dependant variable and the effect declined from 1985 to

1995 subsequently inclined during the period starting from 1995 till 2005. The effect of per capita

income was non significant in the year 1985 and 1995 but it became significant in the year 2005.

The coefficient of labour force as a percent of total population remained significant throughout the

study period. The coefficient of education expenditure as a percent of GDP was negative and

significant in the year 1985 but it became positive though insignificant in 1995 and continued the

same in the year 2005. The coefficient of urban population as a percent of total population though

insignificant but continued to be negative throughout the period of study. The coefficient of non

agricultural labour force was positive and significant in the year 1985 but it became insignificant in

the year 1995 and 2005 though remained positive. The coefficient of share of non agricultural sector

as a percent of GDP was positive and non significant in the year 1985, it became negative in the year

1995 and 2005 but non significant.

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Table - 6.9


Countries


Coefficients

t-ratios





Labour force as a percent of total population .082 1.632***




Constant -1.550 -1.755

R2 .702

2

R .486




Lower Middle Income Countries: 1985

The results of the regression analysis of Lower Middle income countries (Group-III) for the

year 1985 are presented in the table 6.10. The results of the regression analysis show that 61.6

percent variations in the dependent variable are explained by the factors under consideration.

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Table - 6.10

Cross Country Regression Results for the year 1985: Group III Lower Middle Income

Countries

HDI Dependent Variable T-ratios


Gross Domestic Saving .015 1.456***


Education Expenditure as a percent of GDP -.004 -0.65


Urban population as a percent of total population -.438 -1.330


Percentage of Labour Force in Non Agriculture sector .700 3.347*

Constant -2.461 -2.110

R2 .778 .616

2

R .616




The coefficient of per capita income (PPP) and percentage of labour force in non-agriculture

sector is positive and significant at one percent level of significance. The coefficient of gross

domestic saving and health expenditure as a percent of GDP are positive and significant at ten

percent level of significance. The coefficient of education expenditure as a percent of GDP, urban

population as a percent of total population and share of non-agriculture sector as a percent of GDP

are negative but non-significant. The coefficient of labour force as a percent of total population is

positive but non-significant. The coefficient of labour force as a percent of total population is .055

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meaning thereby that if there is one percent increase in it, the human development index will

increase by .055 percent.


The cross country regression results for the year 1995 for Group-III countries are presented

in the table 6.11. The results of the regression analysis show that 61 percent variations in the

dependent variable are explained by the set of explanatory variables. The coefficient of per capita

income (PPP) is positive and highly significant at one percent level of significance. The coefficient

of labour force in non-agriculture sector is positive and significant at 10 percent level of

significance. The coefficient of gross domestic saving, health expenditure as a percent of GDP,

labour force as a percent of total population and labour force in non-agriculture sector is positive but

non significant.

The coefficient of education expenditure, urban population and share of non-agriculture

sector is negative but non significant. The coefficient of health expenditure as a percent of GDP is

.102 meaning thereby that if there is increase of 1 percent in the health expenditure, the human

development index will increase by .102 percent.

Table - 6.11 Cross Country Regression Results for the year 1995: Group III Lower Middle Income

Countries HDI Dependent Variable Regression

Coefficients t-ratios





Labour force as a percent of total population .346 1.275



Percentage of Labour Force in Non Agriculture sector .326 1.431***

Constant -4.594 -2.497

R2 .774

2

R .609




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The results of the cross country regression analysis for Group-III countries for the year 2005

are presented in the table 6.12. The results of the regression analysis show that 93.1 percent

variations in the dependent variable are explained by the set of eight explanatory variables under

consideration. The coefficient of per capita income, labour force as a percent of total population,

share of non- agriculture sector as a percent of GDP are positive and significant at one percent level

of significance. The coefficient of health expenditure as a percent of GDP and labour force in non-

agriculture sector is positive and significant at 5 percent level of significance. The coefficient of

gross domestic saving is negative and significant at 5 percent level of significance. The coefficient

of urban population as a percent of total population is negative and significant at 10 percent level of

significance. The coefficient of education expenditure is negative but non significant.

Table - 6.12

Cross Country Regression Results for the year 2005: Group III Lower Middle Income

Countries HDI Dependent Variable Regression

Coefficients

t-ratios


Gross Domestic Saving -.075 -2.250**

Health Expenditure as a percent of GDP .089 2.378**


Labour force as a percent of total population .413 4.157*


Share of Non Agriculture sector as a percent of GDP .971 4.402*

Percentage of Labour Force in Non Agriculture sector .313 2.450**

Constant -6.469 -9.873

R2 .960

2

R .931




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The study found that the value of 2

R slightly decreased to 0.7 percent in 1995 from 1985.

But it significantly increased by 33 percent in the year 2005. This indicates that the effect of

explanatory variables on the dependent variable over a period of time has significantly increased.

The coefficient of per capita income persistently substantial during the study period. The coefficient

of gross domestic saving which was positive and significant in the year 1985 became non-significant

but positive in the year 1995, and negatively significant in the year 2005. The health expenditure

became non significant in the year 1995 and it again became significant in the year 2005. The

coefficient of labour force in non-agriculture sector remained significant throughout the study period

though at different levels of significance. The labour force as a percent of total population was non

significant in the year 1985 and 1995 but became significant in the year 2005. The coefficient of

education expenditure remained negative though insignificant during the period of study.

Low Income Countries: 1985

The results of cross country regression analysis for low income countries (Group-IV) are

presented in the table 6.13. The results of the regression analysis show that 32.7 percent variation in

the dependent variable are explained by the factors under study. The coefficient of education

expenditure as a percent of GDP and the labour force in the non-agriculture sector is positively

significant at 10 percent level of significance.

The coefficient of urban population as a percent of total population is negative and

significant at 10 percent level of significance. The coefficient of per capita income and health

expenditure as a percent of GDP is negative but non significant. The coefficient of education

expenditure and labour force in non agriculture sector is positive and significant at ten percent level

of significance. The coefficient of urban population is negative and significant at 10 percent level of

significance. The coefficients of the gross domestic saving, labour force as a percent of total

population and share of non-agriculture sector as a percent of GDP are positive but non significant.

The coefficient of health expenditure as a percent of GDP is negative but non significant.

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Table - 6.13

Cross Country Regression Results for the year 1985: Group IV Low Income Countries


Coefficients

t-ratios

Per Capita Income PPP -.127 -.401


Health Expenditure as a percent of GDP -.098 -.643

Education Expenditure as a percent of GDP .254 1.773***



Share of Non Agriculture sector as a percent of GDP .819 .898

Percentage of Labour Force in Non Agriculture sector .444 1.479***

Constant -2.040 -.899

R2 .495

2

R .327





The results of cross country regression analysis for group-IV countries for the year 1995 are

presented in the table 6.14. The results of regression analysis show that 27 percent variation in the

dependent variable are explained by the set of explanatory variables under study. The coefficient of

gross domestic saving is positive and significant at 5 percent level of significance. The coefficient

of share of non agriculture sector as a percent of GDP and labour force in non-agriculture sector is

significant at 10 percent level of significance. The coefficient of per capita income, labour force, as

a percent of total population and urban population as a percent of total population are negative but

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non significant. The coefficient of health expenditure, education expenditure are positive but non

significant.

The coefficient of health expenditure is .202 meaning thereby that if there is one percent

increase in the health expenditure, the human development index will increase by .202 percent.

Table - 6.14



Coefficients

t-ratios

Per Capita Income PPP -.176 -1.271

Gross Domestic Saving .026 1.888**


Education Expenditure as a percent of GDP .106 1.045

Labour force as a percent of total population -.738 -1.371

Urban population as a percent of total population -.376 -1.224


GDP

1.648 2.116***


sector

.384 1.569***

Constant -.175 -.062

R2 .577

2

R

.269





The results of cross country regression analysis for the year 2005 for Group-IV countries are

presented in the table 6.15. The results of the cross country regression analysis show that 58.7

percent variations in the dependent variable are explained by the factors under study. The

coefficient of gross domestic saving is positive and significant at one percent level of significance.

The coefficient of urban population as a percent of total population is negative and that of labour

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force in non-agriculture sector is positive and both are significant at 10 percent level of significance.

The coefficient of health expenditure is negative but non significant. The coefficient of per capita

income, education expenditure, labour force as a percent of total population and share of non-

agriculture sector as a percent of GDP are positive but non significant.

Table - 6.15



Coefficients

t-ratios


Gross Domestic Saving .117 3.229*

Health Expenditure as a percent of GDP -.101 -1.328

Education Expenditure as a percent of GDP .082 1.376

Labour force as a percent of total population .569 1.111



GDP

.480 1.224


sector

.265 1.480***

Constant -4.496 -1.724

R2 .761

2

R .587




The study found that the value 2

R first decreased to 27 percent in 1995 from 32.7 percent in

1985. It increased to 58.7 percent in the year 2005. This indicates that the effect of the explanatory

variables first decreased over a period of time from 1985 to 1995 and increased over a period of time

from 1995 to 2005. The coefficient of per capita income was negative in the year 1985 and 1995

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though insignificant, it became positive in the year 2005 but insignificant. The coefficient of gross

domestic saving was insignificant in the year 1985 but significant in the year 1995 and 2005. The

coefficient of health expenditure was positive but insignificant in the year 1985 but it became

negative in the year 1995 and 2005 though remained insignificant. The education expenditure was

significant in the year 1985 but over a period of time it became non significant. The coefficient of

urban population remained negative throughout the period of study and significant except in the year

1985. The coefficient of percentage of labour force also remained significant throughout the period

of study.

SECTION - III

Developing Countries Analysis:

In this section analysis has been done to study the human capital status of developing

countries. The multiple regression analysis technique was applied to see whether the effect of

different factors differs significantly between the countries. The human development index has been

used as a proxy for judging the human capital level. Attempt has been made to find the relationship

of human development index with per capita income (PPP), gross domestic saving, health

expenditure as a percent of GDP, education expenditure as a percent of GDP, labour force as a

percent of total population, share of non-agriculture sector as a percent of GDP, percentage of labour

force in non-agriculture sector.

Developing Countries Analysis: 1985

The cross country regression result for all the developing countries for the year 1985 are

presented in the table 6.16. The results of the regression analysis as given by equation I shows that

75.3 percent variation in the dependent variable are explained by the set of explanatory variable

under study. The coefficient of per capita income (PPP) is positive and significant at one percent

level. This means that as the per capita income increases the human capital level increased

significantly in the year 1985. The coefficient of percentage of labour force in non-agriculture sector

is positive and significant at one percent level of significance. This is due to the fact that as the

labour force in non agriculture sector increases their income increases. The increase in income lead

to better standard of living of people and hence increase in human development index which

signifies the increase of human capital level. The coefficient of urban population as a percent of

total population is negative and significant at five percent level of significance. The coefficient of

gross domestic saving, health expenditure as a percent of GDP, labour force as a percent of total

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population and share of non agriculture sector as a percent of GDP are positive but non significant.

The coefficient of health expenditure as a percent of GDP is .016. This indicates that if there is 1

percent increase in the health expenditure the human development index will increase by .016

percent.

The analysis has also been done to find the relationship by excluding the variable per capita

income. The equation II of the table shows that 68.3 percent variations in the dependent variable are

explained by the explanatory variables under consideration. The coefficient of health expenditure as

a percent of GDP and share of non-agriculture sector as a percent of GDP are positive and

significant at five percent level of significance. The coefficient of percentage of labour force as a

percent of total population remained positive and significant at one percent level and that of urban

population as a percent of total population is negative and significant at five percent level of

significance.

Table - 6.16 Cross Country Regression Results for the year 1985: Developing Countries Analysis

HDI Dependent Variable Eq 1 T-Value Eq II T-Value


Gross Domestic Saving .007 .960 .013 1.714

Health Expenditure as a percent of GDP .011 .277 .076 1.895**

Education Expenditure as a percent of

GDP

.016 .375 .005 .107

Labour force as a percent of total

population

.074 .731 .021 .182

Urban population as a percent of total

population

-.299 -2.243** -.291 -1.925**

Share of Non Agriculture sector as a

percent of GDP

.459 1.110 .993 2.238**

Percentage of Labour Force in Non

Agriculture sector

.508 3.527* .740 4.956*

Constant -3.726 -5.385 -3.349

R2 .787 .721

2

R .753 .683

Note: * Significant at 1% level of significance

** Significant at 5% level of significance

*** Significant at 10% level of significance

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The cross country regression results for human capital status for the year 1995 are presented

in the table-6.17. The equation I of the table show that 79.7 percent variations in the dependent

variable are given by the set of explanatory variables under study. The coefficient of per capita

income (PPP) is found to be positive and significant at one percent level of significance. The

coefficient of share of non-agriculture sector as a percent of GDP is positive and significant at five

percent level and the coefficient of percentage of labour force in non- agriculture sector is positive

and significant at one percent level of significance.

Table - 6.17

Cross Country Regression Results for the year 1995: Developing Countries Analysis



Gross Domestic Saving .001 .066 .012 2.021**



GDP

.005 .117 .006 .137


population

.021 .174 .014 .109


population

-.249 -1.641*** -.251 -1.490***


percent of GDP

1.151 2.811** 1.722 4.107*


Agriculture sector

.364 3.184* .519 4.413*

Constant -4.270 -5.306 -4.443 -4.981

R2 .825 .780

2

R .797 .750




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The coefficient of gross domestic saving, health expenditure, education expenditure as a

percent of GDP, labour force as a percent of total population are positive but non significant. The

coefficient of labour force as a percent of total population is .021 indicating that if there is one

percent increase in the labour force as a percent of total population the human development index

will increase by .021 percent.

The analysis has also been made to find the relationship by excluding the variable per capita

income (PPP). The equation II of the table shows that 75 percent variations in the dependent

variable are explained by the explanatory variables under study. The coefficient of gross domestic

saving and health expenditure as a percent of GDP are positive and significant at five percent level

of significance. The coefficients of share of non-agriculture sector as a percent of GDP become

positive and significant at one percent level of significance. The coefficient of urban population as a

percent of total population remained negative and significant at 10 percent and that of percentage of

labour force in non- agriculture sector positively significant at one percent level of significance.


The cross country regression results for human capital status for developing countries for the

year 2005 are presented in the table 6.18. The equation I of the table shows that 88.6 percent

variations in the dependent variable are explained by the explanatory variables under study. The

coefficients of per capita income (PPP) and percentage of labour force as a percent of total

population are positive and significant at one percent level of significance. The coefficient of labour

force as a percent of total population and coefficient of share of non-agriculture sector as a percent

of GDP are positive and significant at five percent level of significance. The coefficient of urban

population as a percent of total population is negative and significant at five percent level of

significance. The coefficient of gross domestic saving, health expenditure and education

expenditure are positive but non-significant.

Analysis has also been made to find the relationship by excluding the variable per capita

income. The equation II of the table shows that 83.4 percent variations in the dependent variable are

explained by the explanatory variables. The coefficient of health expenditure as a percent of GDP is

positive and significant at five percent level of significance. The coefficient of labour force as a

percent of total population and share of non agriculture sector became significant at one percent

level of significance.

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Table - 6.18

Cross Country Regression Results for the year 2005: Developing Countries Analysis



Gross Domestic Saving .011 .542 .003 .138



GDP

.019 .679 .037 1.116


population

.247 2.706** .379 3.600*


population

-.235 -2.639** -.265 -2.472**


percent of GDP

.616 2.635** .880 3.196*


Agriculture sector

.458 4.307* .777 7.580*

Constant -4.177 -8.645 -4.641 -8.098

R2 .902 .853

2

R .886 .834




SECTION IV

When the analysis for the determinants of human development level is done for all the

countries as a whole the study found that the value of R2 and

2

R which was 83.8 percent and 82

percent respectively in the year 1985 has increased to 87.9 percent and 86.5 percent in 1995. It

further increased to 92.6 and 91.7 percent in 2005. This indicates that the effect of the explanatory

variables on the dependent variables has increased over the period of time. The per capita income

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has continued to be highly significant throughout the study period. The coefficient of gross domestic

saving was significant in the year 1985 but it became insignificant in the year 1995 and 2005. The

coefficient of health expenditure remained significant upto the year 1995 and in the year 2005 it

became insignificant. This indicated that no further increase in health expenditure would result into

the enhancement of human development level. The coefficient of urban population as a percent of

total population remained negatively significant throughout the study period. The coefficient of

share of non agriculture sector as a percent of GDP was non significant in the year 1985 but it

became significant in the year 1995 and continued till 2005. The coefficient of labour force in the

non agriculture sector continued to be significant throughout the study period.

The study found that for Group I (high income) countries over the period from 1985 to 1995

the value of 2

R increased from 81 to 87.6 percent and further it increased to 91 percent in 2005.

The coefficient of per capita income is insignificant in the year 1985 but it became highly significant

in 1995 and 2005. The education expenditure was significant in the year 1985 but it became positive

and insignificant in 1995 and in 2005 its coefficient became negative though non-significant. The

coefficient of urban population was negative in the year 1985 but it became positive in the year 1995

and 2005. The share of non agriculture sector as a percent of GDP was negative in the year 1985

and 1995 but it became positive in the year 2005. The coefficient of health expenditure was

insignificant in the year 1985 and 1995 but over a period of time in 2005 it became significant. The

coefficient of education expenditure was positive in the year 1985 and 1995 but it became negative

in the year 2005.

The study found that over a period of time from 1985 to 1995 the value of 2

R have

decreased from 39 percent to 24.4 percent and it increased over a period from 1995 to 2005 to the

value of 48.6 for group II (upper middle income) countries. The effect of per capita income was non

significant in the year 1985 and 1995 but it became significant in the year 2005. The coefficient of

labour force as a percent of total population remained significant throughout the study period. The

coefficient of education expenditure as a percent of GDP was negative and significant in the year

1985 but it became positive though insignificant in 1995 and continued to be same in the year 2005.

The coefficient of urban population as a percent of total population though insignificant, but

continued to be negative throughout the period of study. The coefficient of non agricultural labour

force was significant in the year 1985 but it became insignificant in the year 1995 and 2005. The

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coefficient of share of non agriculture sector as a percent of GDP was positive and non significant in

the year 1985, it became negative in the year 1995 and 2005 but non-significant.

The study found that for Group III (Lower Middle Income) countries the value of 2

R has

slightly decreased to the tune of 0.7 percent in 1995 from 1985. But it significantly increased by 33

percent in the year 2005. This indicates that the effect of explanatory variables on the dependent

variables over a period of time has significantly increased. The coefficient of per capita income

remains highly significant throughout the period of study. The coefficient of gross domestic saving

which was positive and significant in the year 1985, became non-significant but positive in the year

1995 and negatively significant in the year 2005. The health expenditure became non-significant in

the year 1995 and it became significant in the year 2005. The coefficient of labour force in non

agriculture sector remains significant throughout the study period though at different levels of

significance. The labour force as a percent of total population was non significant in the year 1985

and 1995 but became significant in the year 2005. The coefficient of education expenditure

remained negative though insignificant during the period of study.

While analyzing the Group IV (low income countries), the study found that the value of 2

R

first decreased to 27 percent in 1995 from 32.7 percent in 1985. It increased to 58.7 percent in the

year 2005. This indicates that the effect of the explanatory variables first decreased over a period of

time from 1985 to 1995 and increased over a period of time from 1995 to 2005. The coefficient of

per capita income was negative in the year 1985 and 1995 though non significant, it became positive

in the year 2005 but remained non significant. The coefficient of gross domestic saving was non

significant in the year 1985 but significant in the year 1995 and 2005. The coefficient of health

expenditure has been found to be positive but non significant in the year 1985 but it became negative

in the year 1995 and 2005 though remained non significant. The education expenditure was

significant in the year 1985 but over a period of time it became non-significant. The coefficient of

urban population remained negative throughout the period of study and significant except in the year

1985. The coefficient of percentage of labour force also remained significant throughout the period

of study.

When the analysis is done for developing countries the study found that over a period of time

from 1985 to 2005 the value of 2

R increased to 88.6 percent in 2005 from 75.3 in 1985. The

increase in 2

R indicates that the effects of explanatory variable on the dependent variable have

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increased. The coefficient of per capita income and coefficient of percentage of labour force in non-

agriculture sector and coefficient share of non-agriculture sector as a percent of GDP remained

positively significant throughout the study period. The coefficient of urban population as a percent

of total population remained negatively significant throughout the study period. The coefficient of

gross domestic saving was positive but non significant in 1985. It became significant in 1995 when

the variable per capita income was excluded from the list.

The coefficient of health expenditure was positively significant throughout the period of

study when the variable per capita was excluded. The coefficient of education expenditure as a

percent of GDP remained positive but non significant during the period of study. The coefficient of

labour force as a percent of total population was positive but non-significant in 1985 and 1995 but

became significant in the year 2005.

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