90 Int. J. Education Economics and Development, Vol. 2, No. 1, 2011 Copyright © 2011 Inderscience Enterprises Ltd. Testing causality between human development and economic growth: a panel data approach Muhammad Shahbaz* COMSATS Institute of Information Technology, Lahore Campus M.A. Jinnah Building Defence Road, Off Raiwind Road, Lahore, Pakistan Fax: +92-42-9203100 E-mail: shahbazmohd@live.com *Corresponding author Azhar Iqbal Wachovia Corporation, Securities and Exchange Commission, Washington, D.C. 20549, USA E-mail: azhar.iqbal@wachovia.com Muhammad Sabihuddin Butt Applied Economics Research Centre, University of Karachi, Karachi, 75270, Pakistan Fax: (021)-9261545 E-mail: wasih@aerc.edu.pk Abstract: This study provides evidence on human development-economic growth causality by employing a large macro panel dataset. We followed the UNDP’s approach for human development. With the help of Hurlin (2004) fixed coefficient approach, we tested causality between human development and economic growth (EG). The results show homogeneous causality from HD to EG. This is not the same when we tested causality from EG to HD. A heterogeneous causality is found from EG to HD. Only Korea and Singapore have bidirectional causality between human development and economic growth. On the other hand, Bangladesh and Philippine have no causality from EG → HD (human development index, education-index, life-index, and PPP index). Result suggests that HD will lead EG but EG not always lead HD. Keywords: panel causality test; human development; HD; economic growth; EG. Reference to this paper should be made as follows: Shahbaz, M., Iqbal, A. and Butt, M.S. (2011) ‘Testing causality between human development and economic growth: a panel data approach’, Int. J. Education Economics and Development, Vol. 2, No. 1, pp.90–102. Biographical notes: Muhammad Shahbaz is a Research Fellow in the Department of Management Sciences at COMSATS Institute of Information Technology, Lahore, Pakistan. He obtained his Master in Applied Sciences, specialising in Economics from Karachi University. He also obtained his