Human Development, Freedom, and Income Inequality: Evidence from ASEAN Countries
Article Sidebar
Main Article Content
Abstract
Income inequality reflects the uneven distribution of income within a country's population, with high inequality levels often leading to social and economic instability. Among the potential determinants of income inequality, the Human Development Index (HDI) has received increasing attention for its multidimensional approach to development. Rooted in Amartya Sen’s Capabilities Approach, HDI expands beyond GDP by incorporating indicators of health and education. However, it omits Sen’s core emphasis on freedom—defined as individuals' ability to realize and express their capabilities. This study introduces an Extended Freedom-based HDI (EFHDI), which includes a freedom component, and examines its effect on income inequality compared to the standard HDI. Using the ARDL-PMG model, the analysis covers ASEAN countries from 1995 to 2020. The findings indicate that while neither HDI nor EFHDI significantly affects income inequality in the short run, both exert a significant negative effect in the long run. Notably, the long-run impact of EFHDI is nearly twice that of the standard HDI, underscoring the enhanced role of freedom in promoting equitable income distribution. These results are confirmed through robustness checks using the CS-ARDL model, and Granger causality tests further reveal a bidirectional relationship between both HDI variants and the Gini index. Based on these findings, the study recommends that ASEAN policymakers integrate freedom-related reforms—such as safeguarding civil liberties, strengthening rule of law, and improving access to fair markets—into broader human development strategies to reduce long-term income inequality.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
The paper is published under CC BY-NC-ND, in which the article is freely downloaded and shared in its original form non-commercially and its citation details are identified.
References
Abdullah, A., Doucouliagos, H., & Manning, E. (2015). Does education reduce income inequality? A meta‐regression analysis. Journal of Economic Surveys, 29(2), 301–316.
Alpdogan, H. (2023). The relationship between economic growth, income distribution and poverty in Türkiye. Journal of Turkish Court of Accounts, 34(129), 259–290.
Alvan, A. (2009). Forging a link between human development and income inequality: Cross-country evidence. Review of Social, Economic & Business Studies, 7(8), 31–43.
Anand, S., & Sen, A. (2000). The income component of the human development Index. Journal of Human Development, 1(1), 83–106.
Apergis, N. (2015). Economic freedom and income inequality: Further evidence from 58 countries in the long-run. Financial Theory and Practice, 39(4), 349–370.
Apergis, N., Dinçer, O., & Payne, J. (2014). Economic freedom and income inequality revisited: Evidence from a panel error correction model. Contemporary Economic Policy, 32(1), 67–75.
Ashby, N.J., & Sobel, R.S. (2008). Income inequality and economic freedom in the U.S. states. Public Choice, 134, 329–346.
Asteriou, D., Pilbeam, K., & Pratiwi, C. E. (2021). Public debt and economic growth: Panel data evidence for Asian countries. Journal of Economics and Finance, 45(2), 270–287.
Balogun, A. M., Adelowokan, O. A., Ajayi, F. O., & Ogede, J. S. (2024). Trade openness, poverty, and sustainable development: Testing for causality using Dumitrescu-Hurlin approach. Journal of Enterprise and Development, 6(2), 280–289.
Bennett, D. L., & Vedder, R. K. (2013). A dynamic analysis of economic freedom and income inequality in the 50 US states: Empirical evidence of a parabolic relationship. Journal of Regional Analysis & Policy, 43(1), 42–55.
Berggren, N. (1999). Economic freedom and equality: Friends or foes? Public Choice, 100, 203–223.
Bergh, A., & Nilsson, T. (2010). Do liberalization and globalization increase income inequality? European Journal of Political Economy, 26(4), 488–505.
Bosah, C. P., Li, S., Ampofo, G. K. M., & Liu, K. (2021). Dynamic nexus between energy consumption, economic growth, and urbanization with carbon emission: Evidence from panel PMG-ARDL estimation. Environmental Science and Pollution Research, 28(43), 61201–61212.
Boz, Ç. (2012). Adam Smith ve Amartya Sen [Adam Smith and Amartya Sen]. Gazi Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 14(3), 71–96.
Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239–253.
Bucak, Ç. (2021). Economic complexity index, human development index and carbon emissions in EU15 countries and in Turkey: Panel data analysis. Ege Stratejik Arastırmalar Dergisi, 12(1), 71–88.
Bucak, Ç., & Saygılı, F. (2022). The relationship between trade openness, income inequality and human development: A panel data analysis. Ege Stratejik Arastırmalar Dergisi, 13(2), 23–41.
Çalışkan, Ş. (2010). Income inequality and poverty in Turkey. Journal of Social Policy Conferences, (59), 89–132.
Carter, J. R. (2007). An empirical note on economic freedom and income inequality. Public Choice, 130(1), 163–177.
Clark, J. R., & Lawson, R. A. (2008). The impact of economic growth, tax policy and economic freedom on income inequality. The Journal of Private Enterprise, 24(1), 23–31.
Çoban, B., & Durusu Çiftçi, D. (2024). Economic freedom and income inequality: An empirical note for the Post-GFC period. Ankara Hacı Bayram Veli Üniversitesi Iktisadi Ve Idari Bilimler Fakültesi Dergisi, 26(3), 1049–1072.
Commons, J. R. (1936). Institutional economics. The American Economic Review, 26(1), 237–249.
Deaton, A. (2003). Health, income, and inequality. NBER Reporter Online, Spring 2003, 9-12. Retrieved from https://www.nber.org/reporter/spring-2003/health-income-and-inequality
De Soysa, I., & Vadlamannati, K. C. (2023). Free market capitalism and societal inequities: Assessing the effects of economic freedom on income inequality and the equity of access to opportunity, 1990–2017. International Political Science Review, 44(4), 471–491.
Dogan, H. (2023). Macro empowerment policies for poverty in promoting social justice. Kahramanmaras Sütçü Imam University Journal of Social Sciences, 20(2), 496–508.
Dumitrescu, E. I., & Hurlin, C. (2012). Testing for granger non-causality in heterogeneous panels. Economic modelling, 29(4), 1450–1460.
Durgun, B., & Durgun, Ö. (2023). The relationship between income inequality and human development: evidence from Türkiye. Kastamonu University Journal of Faculty of Economics and Administrative Sciences, 25(1), 45–73.
Fisunoglu, M., & Tan, B. K. (2009). Keynes’s revolution and Keynesian economics. Ekonomik Yaklasim, 20(70), 31–60.
Fukuyama, F. (2005). State-building: Governance and world order in the 21st century (D. Çetinkasap, Trans.). Remzi Kitabevi. [In Turkish, original work published 2004]
Ghifara, A. S., Iman, A. N., Wardhana, A. K., Rusgianto, S., & Ratnasari, R. T. (2022). The effect of economic growth, government spending, and human development index toward inequality of income distribution in the metropolitan cities in Indonesia. Daengku: Journal of Humanities and Social Sciences Innovation, 2(4), 529–536.
Gökçeli, E. (2023). Institutional quality and foreign direct investment: Evidence from OECD countries. Ekonomický Casopis, 71(3), 222–257.
Gregorio, J. D. & Lee, J. W. (2002). Education and income inequality: New evidence from cross‐country data. Review of Income and Wealth, 48(3), 395–416.
Gürses, D. (2009). Human development and Turkey. Balıkesir University Journal of Social Sciences Institute, 12(21), 339–350. [In Turkish]
Heritage Foundation. (2024). 2024 index of economic freedom [Data set]. Retrieved from https://www.heritage.org/index/pages/all-country-scores
Heritage Foundation. (2025). The index of economic freedom. Retrieved from https://www.heritage.org/index/pages/about
International Labour Organization (ILO). (2018). More than 68 per cent of the employed population in Asia-Pacific are in the informal economy. Retrieved from https://www.ilo.org/resource/news/more-68-cent-employed-population-asia-pacific-are-informal-economy?utm_source=chatgpt.com
Irwin, D. A. (2020). Adam Smith’s “tolerable administration of justice” and the Wealth of Nations. Scottish Journal of Political Economy, 67(3), 231–247.
Karas, G. (2021). Income distribution and development relationship: The case of BRICS-T countries. Maliye Dergisi, 180, 233–251.
Kılıç, R., & Gökçeli, E. (2024). A new perspective on income inequality through the human development index. Kafkas University Economics and Administrative Sciences Faculty, 15(29), 214–242.
Konu, A. (2017). Relationship between income inequality and economic freedom: An empirical evaluation for OECD countries. Gaziantep University Journal of Social Sciences, 16(4), 928–936.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45(1), 1–28.
Lustig, N. (2015). The redistributive impact of government spending on education and health: Evidence from thirteen developing countries in the Commitment to Equity project (CEQ Working Paper No. 30). Tulane University.
Martinez-Vazquez, J., Moreno-Dodson, B., & Vulovic, V. (2012). The impact of tax and expenditure policies on income distribution: Evidence from a large panel of countries. Hacienda Pública Española/Review of Public Economics, 200(1), 95–130.
Mazumdar, K. (2003). A new approach to human development index. Review of Social Economy, 61(4), 535–549.
Mbaku, J. M. (1997). Inequality in income distribution and economic development: Evidence using alternative measures of development. Journal of Economic Development, 22(2), 57–67.
Mehic, A. (2018). Industrial employment and income inequality: Evidence from panel data. Structural Change and Economic Dynamics, 45, 84–93.
Miller, T., Kim, A. B., & Roberts, J. M. (2018). 2018 index of economic freedom. Washington, DC: The Heritage Foundation.
Miller, T., Kim, A. B., & Roberts, J. M. (2022). 2022 index of economic freedom. Washington, DC: The Heritage Foundation.
Nazirou, S. C. M., Mousa, D. S. M., & Ahmed, A. T. (2022). The impact of economic freedom and democracy on income inequality: Empirical evidence from Sub-Saharan African countries. Archives of Business Research, 10(3), 217–234.
North, D. C. (1994). Institutional change: A framework of analysis (Economic History Working Paper No. 9412001). University Library of Munich, Germany. Retrieved from https://ideas.repec.org/p/wpa/wuwpeh/9412001.html
OECD. (2015). In it together: Why less inequality benefits all. Paris, France: OECD Publishing.
Olsson, O. (1999). A microeconomic analysis of institutions (Working Papers in Economics, No. 25). Department of Economics, Goteborg University, Gothenburg, Sweden.
Özden, E., Gültekin, Ö. F., & Bayramoğlu, T. (2022). An analysis on the relationship between income distribution and human development with panel data and machine learning. Gaziantep University Journal of Social Sciences, 21(2), 564–582.
Öztürk, E. & Oktar, S. (2017). Income inequality development relationship: The case of Turkey. The Academic Elegance, 4(8), 101–123.
Öztürk Ofluoğlu, N., Artan, S., & Kalaycı, C. (2018). The relationships of institutional quality, economic freedoms and income distribution: A case of the MINT countries. Hak-İş Uluslararası Emek ve Toplum Dergisi, 7(17), 90–107.
Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61(S1), 653–670.
Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265–312.
Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric reviews, 34(6-10), 1089–1117.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American statistical Association, 94(446), 621–634.
Puspita, Y., Nurazi, R., Ekaputri, R. A., & Armelly, A. (2024). Dynamic analysis of corruption, economic growth, income inequality, and human development index (HDI) in ASEAN countries: A vector autoregressive (VAR) approach. In Proceedings of the Bengkulu International Conference on Economics, Management, Business and Accounting (BICEMBA) (Vol. 2, pp. 887–898). Bengkulu, Indonesia: University of Bengkulu.
Rachmawatie, D., & Prakoso, A. Y. (2023). The influence of human development index on the income distribution inequality in Yogyakarta. Jambura Agribusiness Journal, 4(2), 67–75.
Sabir, S., & Aziz, N. (2018). Impact of health and education on income inequality: Evidence from selected developing countries. Business and Economic Review, 10(4), 83–101.
Samargandi, N., Fidrmuc, J., & Ghosh, S. (2015). Is the relationship between financial development and economic growth monotonic? Evidence from a sample of middle-income countries. World Development, 68, 66–81.
Scully, G. (2002). Economic Freedom, government policy, and the trade-of between equity and economic growth. Public Choice, 113(1), 77–96.
Seefeldt, B. (2018). The impact of education expenditures on income inequality: Evidence from US States. (Unpublished honors dissertation). Bryant University.
Sen, A.K. (1999). Development as freedom. Oxford: Oxford University Press.
Sen, H., & Sagbas, I. (2017). Tax theory and policy (3rd ed.). Ankara, Turkey: Barış Arıkan Publications. [In Turkish]
Solt, F. (2020). Measuring income inequality across countries and over time: The standardized world income inequality database. Social Science Quarterly, 101(3), 1183–1199.
Theyson, K. C., & Heller, L. R. (2015). Development and income inequality: A new specification of the Kuznets hypothesis. The Journal of Developing Areas, 49(3), 103–118.
Trabold-Nübler, H. (1991). The human development index-a new development indicator? Intereconomics, 26, 236–243.
Tsitouras, A., & Papapanagos, H. (2025). The relationships between economic freedom, income inequality, and economic growth: Empirical evidence from an asymmetric analysis in the case of Greece. Portuguese Economic Journal, 1–36.
United Nations Development Programme (UNDP). (1990). Human development report 1990. New York: Oxford University Press.
United Nations Development Programme (UNDP). (2024). Human development index (HDI) [Data set]. Human Development Reports. Retrieved from https://hdr.undp.org/data-center/human-development-index#/indicies/HDI
Veblen, T. (2017). The theory of the leisure class. New York: Routledge.
Vo, D. H., Vo, A. T., & Ho, C. M. (2024). The short-and long-run effect of human capital on income inequality: Empirical evidence in the ASEAN region. Plos One, 19(7), e0304678.
Walker, M. (2005). Amartya Sen’s capability approach and education. Educational Action Research, 13(1), 103–110.
Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69(6), 709–748.
Yalçın, A. Z., Yılmaztürk, A. & Yıldız, F. (2023). The impact of public education expenditures reducing income inequality: The sample of selected OECD countries (2010–2019). Journal of Administrative Sciences, 21(48), 248–274.
Younger, S. D. (1999). The relative progressivity of social services in Ecuador. Public Finance Review, 27(3), 310–352.
