The Institutional Environment, Human Capital Development, and Productivity-Enhancing Factors: Evidence from ASEAN Countries

Abstract

We explored the nexus between the quality of human capital, productivity-enhancing factors, and the quality of institutions in nine Association of Southeast Asian Nations (ASEAN) countries using canonical correlation and principal component analysis of country-level data for 2007–2017 from the World Bank, World Economic Forum, and Penn World Tables databases. We found that an unequal development of human capital in the ASEAN countries is clearly linked to their heterogeneous institutional conditions and that the quality of human capital drives technology absorption and innovation. The four transition economies in the region—Laos, Cambodia, Vietnam, and Myanmar—are facing particularly difficult challenges in developing institutional environments that stimulate human capital development to reach higher levels of knowledge intensity of their economies and achieve the resulting competitive advantages.