Impact of HDI on Economic Growth in Ethiopia: Regional Analysis

Abstract

Human development encompasses much more than just economic growth. While human development focuses on expanding all human alternatives, such as education, health, a clean environment, and material well-being, economic growth concentrates on improving one option, such as income or product. Ethiopia is ranked 175th out of 191 nations and territories with an HDI value of 0.498 for 2021, placing it in the Low human development category. Ethiopia’s HDI score has always been lower than the world average and Sub-Saharan Africa average. Compared to all regions in Ethiopia, Afar, and Somali registered the least average HDI score during 2000-21. The Ethiopian Gender Development Index (GDI) noted 0.921, which is the ratio of female HDI to male HDI, indicating that on average, female HDI is 8 percent lower than male HDI. Stated another way, the female HDI value is on average 92 percent of the male HDI. From the panel regression, there is a significant and systematic relationship between HDI and LGNPCI because the HDI has positive coefficients and probability values less than 0.01 in the three estimated regression models. This suggests that the Human Development Index positively impacts the per capita income of each of Ethiopia's 11 regions. Increasing public investment in health and education can lead to better health and skill outcomes for the populace, raising life expectancy and income levels. Rising per capita income and life expectancy can help a nation's economy grow.