Trade and Human Development in OIC Countries: A Panel Data Analysis

This study examines the impact of trade on the OIC countries’ social developments as measured by the Human Development Index (HDI) using the generalized method of moments (GMM) procedure in a panel data distributed lag model for the years 1980 to 2005, with a five-year increments as well as annual data from 2000 to 2009. It addresses two questions: (i) whether trade has a positive impact on human development as reflected by longevity, educational attainment and income in the HDI measurement, and (ii) if the positive relationship between trade and human development still exists, when the income component of the HDI is excluded. Comparisons are made across OIC countries based on three World Bank Classifications by Income, namely, high income, middle income and low income countries. Trade is found to have a significant positive effect on HDI for all income categories, but insignificant effect on non-income HDI. The finding indicates that trade affects human development only through income