An analysis of causal flow between social development and economic growth: the social developement index

American Journal of Economics and Sociology, The,  July, 1996  by Krishna Mazumdar

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[TABULAR DATA FOR TABLE 1 OMITTED]

The results obtained from the F-statistic throw light to the fact that for the world Per Capita Real Gross Domestic Product precedes Social Development Index. In fact, increase in Per Capita Real Gross Domestic Product enables a country to invest more on social aspects of life. This bears evidence in favor of the view of Ram (1985) and Goldstein (1985) that increase in per capita income should improve the level of basic needs fulfillment. This result does not hold when income groupwise situation is considered. It has been observed that for the high income group (HIG) Social Development Index (SDI) and Per Capita Gross Domestic Product (PCRGDP) are independent. But for the middle income group (MIG) and low income group (LIG), Social Development Index precedes Per Capita Real Gross Domestic Product. This sheds light to the fact that up to certain level of income there is a one way causal flow from Social Development Index to Per Capita Real Gross Domestic Product, but after attainment of certain minimum level of economic growth, a country's social development and economic growth may move independently. At the low level of economic growth, in general, the level of social development is also low. Low social development implies low literacy rate, low life expectancy, low infant survival rate, low number passenger car etc. These imply underdeveloped infrastructure and low labor productivity which in turn implies low Per Capita Real Gross Domestic Product, a typical vicious circle phenomenon.

Casual relations between Per Capita Real Gross Domestic Product and the constituent social indicators (Urban Population, life expectancy at birth, calorie supply per capita as percentage of requirement, infant survival rate per 1000 of live births, physician per 1000 of population, adult literacy rate, teacher pupil ratio in primary schooling and passenger car per 1000 of population) have been presented in Table 2. Column headings of Table 2 are same as those of Table 1. The table portrays that for the entire sample, urban population, life expectancy at birth and infant survival rate per 1000 of live births precedes Per Capita Real Gross Domestic Product while calorie supply per capita as percentage of requirement, adult literacy rate and teacher pupil ratio in primary schooling follows Per Capita Real Gross Domestic Product, physician per 1000 of population and Per Capita Real Gross Domestic Product have no causal relation but passenger car per 1000 of population and Per Capita Real Gross Domestic Product evidence bidirectional causal flow between themselves.

The table also picturies income groupwise variation of causal relations between each social indicator of life and Per Capita Real Gross Domestic Product. There is unidirectional causal flow from urban population to Per Capita Real Gross Domestic Product for the high income group and low income group but bidirectional causal flow between urban population and Per Capita Real Gross Domestic Product for middle income group.