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Spillover Effects: Border Effect on Values of Human Development Index (HDI)

Effects of events happening in one country tend not to be limited to that country but generally spillover in different forms to nearby countries. This paper presents a model for measuring cross-border spillover effects on the economic development and social well-being among neighboring countries distinguishing between direct and indirect effects. The level of economic development is measured by using values of the Human Development Index as an indicator not only of economic activity but also of social conditions in the broader sense. An empirical analysis of the model is completed by using the HDI values for the countries of Africa. The result shows that about 45% of a country’s HDI can be explained by HDI values of bordering countries.