Financial Crises and Human Development

Abstract

This study examines the impact of financial crises on human development over a panel of 113 countries for the years 1980-2017. Special attention is given to the effects of different types of financial crises on overall human development and its components: health, education, and income. Relying on a System-GMM estimator, this study finds that financial crises are more important than political, institutional, and economic factors to explain the human development dynamics. Moreover, all types of financial crises have both short- and long-run adverse effects on human development and its components. Such deteriorations are permanent and increase the burden for future generations, especially for low-income households. Nevertheless, education is less affected by financial crises than health and income. Furthermore, low- and middle-income countries pay a higher price, in terms of human development loss, than developed countries as consequences of financial crises.