Determinants of Economic growth in a panel of Asean and developing countries

Abstract

This research will examine the relationship between per capita growth rate and a set of quantifiable explanatory variables: human capital (education and health), policies, institution and national characteristics. From empirical studies,for given initial levels of state variables (including physical and human capital,the economic growth rates have positive relation to the rule of law, the investment ratio and negative relation to the fertility rate, the ratio of government consumption to GDP and the inflation rate. In the case of the terms of trade and the extent of internationalopenness, with fair movements, the growth will increase but the latter effect is surprisingly weak. The research will define which factors affect to the growth rate of Asian Pacific developing countries, including Vietnam. It also extend to evaluate some special countries, which have huge population size, such as: China, India; or developed countries, such as Japan, Australia, Singapore and so on. gives an overview on theoretical background, which shows us empirically determinants of economic growth.. Conceptual framework establishes based on the empirical studies and theoretical background of convergence hypothesis in growth model. The growth rate of per capita GDP is chosen as dependent variables and a set of quantifiable variables is used as explanatory variables. The author discussed about variables and their empirical studies’ results, identified their roles and impacts of them to the growth rate. A summary of expected sign and empiricalreference for all variables showed in table 3.1. The author present summary of statistical analysis for all variables during period 1990-2010 for 25 countries and territories of Asia Pacific region. The growth rate is not only have absolute convergence, but also conditional convergence. Beside initial level of the economy, other factors like trade, investment, institutions and national characteristics also have a significantly affect to the growth rate. The research has use three-stage regression model to estimate the relation between the growth rate and a set of quantifiable variables by using lagging variables as instruments. The result shows that per capita growth rates are enormously different across economies. There are existences of absolute and condition convergence in the growth rate of an economy. According absolute convergence, the positive effect on growth when the initial level of real per capita GDP is low. But, in conditional convergence, this effect will change, based on the starting amount of human capital and a set of explanatory variables. These variables can be policy variables or national characteristics, such as: the extent of international openness, governments’ consumption, investment ratio, inflation rate and so on.