Impact of Government Investment in Human Capital on Labor Force Participation and Income Growth Across Economic Tiers in Southeast Asian Countries

Prior economic research emphasized land, labor and physical capital as the primary drivers of growth, but contemporary work highlights the pivotal role of human capital. Investments in education, health and governance are now regarded as central to sustainable development; yet important questions remain regarding their effectiveness and context-specific impact. This study investigates how human capital investment influences labor force participation and income growth within the ASEAN nine economies for the period from 2000 to 2022 which provides a rich example of contrast in economic and governance outcomes within a single geographic region. Impacted units of measurement of labor force participation and income growth are evaluated using the Bayesian Additive Regression Trees model to select the most important variables, the Bayesian Dynamic Nonlinear Multivariate panel model to estimate regional effects, and the Time-varying Seemingly Unrelated Regression Equations model to evaluate country-specific dynamics, which considers not just the influence of investments in health and education but also the context of rule, law, and governance. The findings indicate that human capital investments exhibit heterogenous effects across economic tiers and the need for strategies and future study of preconditions to improve returns particularly in low-tier economies. Accordingly, mid-tier, emerging economies exhibit the greatest benefit from human capital investments while top-tier exhibit the probable impact of the law of diminishing returns as their human capital development is already well underway. Despite the limited scope, this study still has the potential to draw constructive theoretical and practical implications.