People’s welfare is a universal goal that is the main focus of all countries in the world. One of the indicators used to measure welfare is the Human Development Index (HDI), which includes education, health and per capita income. HDI is a strategic indicator widely used to evaluate the overall efforts and performance of development programs in a region. The HDI is crucial for assessing success in improving the quality of human life. Since 1990, the United Nations Development Program (UNDP) has used the HDI to evaluate human development achievements in various countries. One indicator of a region’s population welfare level is Gross Domestic Product (GDP) per capita. Gross Domestic Product (GDP) is the main measure of a region’s economic growth. GRDP represents the net value of final goods and services produced by various economic activities in a region within a specific period.
The Human Development Index (HDI) and Gross Domestic Product (GDP) have been shown to be closely correlated in various studies. Based on the results of research aimed at highlighting how regional economic dynamics affect human well-being worldwide in 2021 using data sources from OurWorldInData, as well as the use of a nonparametric regression method with a penalized spline estimator approach, the results showed that the Penalized Spline Analysis showed that the best model for predicting HDI based on GDP per capita was by using 2 knot points, namely k1 = 8000 and k2 = 50000. This model produced a Mean Squared Error (MSE) value of 0.0018 and a Generalized Cross Validation (GCV) of 0.0019. In addition, this model has the ability to explain response variability of R2 = 91.58%. Grouping countries based on GDP per capita shows that economic growth has different impacts on human development at different income levels. Countries with an income below 8,000 USD should concentrate on improving basic services such as education and health, developing essential infrastructure, and providing social assistance to enhance quality of life and welfare. For those with an income between 8,000 and 50,000 USD, the focus should shift towards reducing economic inequality through equitable development, optimizing budget allocation, and enhancing quality of life aspects like mental health, gender equality, and education to build a skilled workforce. In countries with an income above 50,000 USD, efforts should be directed at ensuring a fair distribution of wealth to mitigate economic inequality, while also investing in social and cultural development to further elevate the overall quality of life and social welfare.
This study underscores the complex relationship between GDP per capita and HDI, revealing that economic growth impacts human development differently across various income levels. It emphasizes the need for targeted policy approaches based on income intervals to effectively address the distinct challenges and opportunities faced by countries at different stages of economic development. By tailoring strategies to specific income groups, policymakers can better enhance human development outcomes and ensure a more equitable and prosperous society.
Author: Dita Amelia
The article can be accessed here: https://journal.its.ac.id/index.php/ijcsam/article/view/8851
