The effect of globalization and human development index on economic growth in developing countries dynamic panel data analysis models

This study analyzes the effect of globalization and human development on economies of various developing countries by using clustering and panel data analysis methods. In this context, the dataset is divided into three groups in terms of their human development performance, low, medium and high. The study uses data between 1995-2019. The dataset is divided into clusters and 3-year averages of countries are evaluated through Arellano and Bond's (1991) Generalized Method of Moments approach, Arellano and Bover's (1995), and Blundell and Bond's (1998) System GMM approaches. The study is structured into four different clusters which have two separate models of their own. The first model represents the effect of Globalization and Human Development indices on economic growth, and the second model integrates Lndmykof variable which is the median country value of Globalization Index on economic growth for countries with comparably low Globalization Index values. The dataset is taken as annual time series values for each country in order to maximize sample size and allow for comparison. In this case, the variables are analyzed for unit root, taking cross-sectional dependence into account, and models were evaluated through the GMM and the System GMM methods. The results of three-year mean model show that, for all four groups, globalization and inertia of economic growth have a positive and significant effect on economic growth while human development level's effect on economic growth becomes negative and, for some countries, statistically insignificant when orthogonality is taken into consideration. Results from analysis of the raw data points to similar conclusions.