Economic reform, human capital, and economic *growth: A comparative study

This dissertation is a theoretical and empirical study of the role of economic reform and human capital in economic growth of South and Southeast Asian countries. We analyze economic reform experiences and explore their effect on economic growth in a comparative perspective for India and Korea as representative, respectively, for South and Southeast Asia.;We develop a dynamic general equilibrium model, which shows implicitly the effect on economic growth of various reform measures in the areas of trade, finance, and enterprise restructuring. We investigate the transitional dynamics of a rise in total factor productivity generated by economics reforms using phase diagrams. We decompose the total factor productivity into two components, one of which is due to economic reform and another is due to the influence of the other developments. We also decompose a labor variable into raw labor and human capital. We estimate several modifications of our base production function to capture varying effects of economic reform.;To test our hypotheses empirically, we construct a composite economic reform index and a composite human capital variable. The composite economic reform index is created by giving equal weights to three major reform areas---trade reform, financial reform, and enterprise restructuring. The derived human capital variable incorporates both educational and health components. Using these variables, a comparative analysis is carried out using a panel data model and a cointegration approach. The results from the panel data model confirm our hypothesis that economic reform has had a positive and significant effect on economic growth, which is present in both contemporaneous and lagged estimations. The hypothesis that human capital affects growth positively also turns out to be true. Our analysis suggests that reforms in labor market and investment in human capital have complementary effects on the efficacy of economic reform. The cointegration analysis confirms the hypothesis of a positive effect of economic reform on economic growth for Korea. For India, the results are more ambiguous and are sensitive to the period under consideration.