An empirical relationship between financial development indicators and human capital in some selected Asian countries

Abstract

Purpose The purpose of this paper is to investigate the relationship between financial development indicators and human capital for Asian countries using the annual data from 1984-2013. Design/methodology/approach The stationarity of the variables are checked by Levin-Lin-Chu, Im-Pesaran-Shin, Fisher-type augmented Dickey-Fuller and Philips-Perron panel unit-root tests. The Pedroni’s and Kao’s panel co-integration approaches are employed to examine the long-run relationship among the variables. To estimate the coefficients of co-integrating vectors, both panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) techniques are used. The short-term and long-run causality is examined by panel granger causality. Findings The Pedroni’s and Kao’s co-integration approaches support the existence of the long-run relationship among the indicators of financial development, economic growth and human capital. The PDOLS and FMOLS estimators revealed that both financial development indicators and economic growth variable act as an important driver for the increase in human capital. The results of panel granger causality indicate that causality runs from indicators of financial development, economic growth and public spending on education to human capital. Originality/value There is hardly any study that examine the impact of financial development indicators and economic growth on human capital in Asian economies, therefore the present study fill the research gap in the literature.

Does financial development improve human capital accumulation in the Southeast Asian countries?

“…Studies on financial development, economic growth and human capital have been conducted mainly for other regions (Chi, 2008;Shan & Morris, 2002). A limited number of studies have been conducted for the developing countries in Asia (Sehrawat & Giri, 2017;Sethi et al, 2019). In particular, empirical studies on the relationship between financial development, economic growth and human capital are relatively limited, especially for emerging countries in the ASEAN region.…”

Linkage between Financial Development and Income Inequality in India

“…Financial systems facilitate trading, diversi cation of risk, resource allocation, mobilization of saving, and monitoring the corporate managers apart from capital accumulation and technological innovations (Levine 1997). Reforms in the fsinancial system widen the developmental role of nance which improves the market ine ciencies and lowers the transaction cost (Sehrawat and Giri 2017). A robust nancial isnfrastructure leads to the growth of businesses and thereby generation of more employment and income (Sehrawat and Giri 2016).…”

Nexus between Debt and Economic Growth: Evidence from Pakistan

“…The analysis is started with unit root test to examine the stationary properties of the variables. This test must be performed in order to avoid spurious regression results (Sehrawat & Giri, 2017). We have used Augmented Dickey Fuller (ADF) test to testify the stationary properties of our variables.…”