Assessing the determinants of human development in OECD economies: evidence from labor productivity and investment decisions

Abstract

Purpose

Development has been a long-age phenomenon from the millennium to sustainability. This is because the new millennium ushered in the episode of development in the global economy from the role of inputs to the role of productivity and knowledge. Thus, understanding the forefront of initiatives to develop better policies for better lives and to find fact-based answers to social, economic, and environmental problems becomes unavoidable.

Design/methodology/approach

The study therefore assesses the impact of labor productivity and investment decisions on human development. A modified production theory was adopted for OECD economies. To address the problem of endogeneity and cross-sectional dependence, a two-step system generalized method of moments, Driscoll–Kraay estimator, and Panel Corrected Standard Error were used.

Findings

The findings reveal that the impact of labor productivity on human development differs significantly from the impact of investment decisions. The result shows that investment decisions will have a positive impact on human development when there is an insignificant capital fixed formation to boost the productivity of OECD economies. Further, the result shows that the organization governments through the provision of social security and essential services have a positive impact on the OECD human development.

Originality/value

This study has contributed significantly to assessing the drivers of human development within the purview of labor productivity, investment decisions and government expenditure in OECD countries.