Inclusive Human Development and Governance Nexus: Causality Analysis of Selected Asian Countries

This study investigates the role of governance in inclusive human development in the case of twenty-four selected Asian countries, using panel data for the time period from 2010 to 2017. The inequality-adjusted human development index, developed by the United Nation Development Program, has been used as a proxy for inclusive human development. In addition, six indicators of governance have been used as independent variables in a regression model, along with three control variables. We have tested the stationarity of our data using panel unit root tests such as Leviv-Lin-Chu and Augmented Dickey Fuller. The Pearson correlation matrix helps us find out the correlation among variables. The findings show a mixed level of correlation among the variables (i.e., high, low, and moderate). Furthermore, our results show that a strong causal relationship among the variables exists. One of the most important findings is that there is bi-directional causality between the inclusive human development index (IHDI) and development expenditure. The IHDI causes more government investment in development projects, whereas more development expenditure in the country achieves a higher IHDI. Trade openness and development expenditure have a bi-directional causal relationship. Finally, economic governance causes political governance in the case of our selected Asian countries.