The Interrelationship between Public Spending, Human Development, and Environmental Performance: Empirical Evidence from the ASEAN Countries

Abstract:

This study analyzes the relationship between public spending, the Human Development Index (HDI), and the Environmental Performance Index (EPI) in ASEAN countries (2008-2022). Employing Fixed Effects regression with Driscoll-Kraay standard errors (FE-DK) to control for autocorrelation and cross-sectional dependence, the results show that while aggregate public spending exerts negative pressure on the environment, HDI plays a crucial positive moderating role. Specifically, high HDI levels help mitigate the adverse effects of public spending. Additionally, health expenditure demonstrates a positive impact, whereas education spending shows no distinct short-term effect. Notably, institutional quality and technological infrastructure exhibit negative correlations with environmental performance. The study recommends integrating public spending expansion with human capital enhancement strategies to ensure green growth.