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

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

The paper “Impact of government investment in human capital on labour force participation and income growth across economic tiers in Southeast Asian Countries” is a valuable study covering one of the most important fields in modern macroeconomics. The particular advantage of the study is that it covers three levels of countries divided according to their level of development. This emphasises the contextual level of the most important macroeconomic parameters and shows that there is no „ceteris paribus“ in practise.

The authors use Bayesian additive regression trees (BART), the Bayesian dynamic nonlinear multivariate panel model and the time-varying seemingly unrelated regression equation model, which provide quantitative innovations and controls for nonlinear and time-varying effects. However, it is not clear enough why this approach is used. The paper would benefit from a clear overview of previous econometric approaches and a clear distinction of the advantages of this approach. Furthermore, the paper does not address the possible endogeneity between human capital investment and economic growth and development. Perhaps the introduction of Bayesian instrumental variable approaches or specifications with lagged variables would increase the credibility of the results. Furthermore, the paper would benefit from a more detailed elaboration of the data – e.g. by introducing descriptive statistics.

The authors could work further on the interpretation and practical relevance of the results. For example, they could elaborate on why investments in health and education appear to have limited or even negative short-term effects in some contexts. Factors such as lagged investment returns, measurement problems or the law of diminishing returns in more developed economies could be discussed.

Author Response

From Reviewer 1: Comments and Suggestions for Authors

The paper “Impact of government investment in human capital on labour force participation and income growth across economic tiers in Southeast Asian Countries” is a valuable study covering one of the most important fields in modern macroeconomics. The particular advantage of the study is that it covers three levels of countries divided according to their level of development. This emphasises the contextual level of the most important macroeconomic parameters and shows that there is no „ceteris paribus“ in practise.

 

Comment 1: The authors use Bayesian additive regression trees (BART), the Bayesian dynamic nonlinear multivariate panel model and the time-varying seemingly unrelated regression equation model, which provide quantitative innovations and controls for nonlinear and time-varying effects. However, it is not clear enough why this approach is used. The paper would benefit from a clear overview of previous econometric approaches and a clear distinction of the advantages of this approach. Furthermore, the paper does not address the possible endogeneity between human capital investment and economic growth and development. Perhaps the introduction of Bayesian instrumental variable approaches or specifications with lagged variables would increase the credibility of the results. Furthermore, the paper would benefit from a more detailed elaboration of the data – e.g. by introducing descriptive statistics.

Response 1: Thank you for these helpful suggestions. We have added a short comparative methods subsection explaining why BART, DNMPM, and tvSURE were chosen, and (2) implemented three robustness checks to address endogeneity concerns. In response, we have also included summary statistics in Appendix A.2, highlighted in color Blue.

 

 

Comment 2: The authors could work further on the interpretation and practical relevance of the results. For example, they could elaborate on why investments in health and education appear to have limited or even negative short-term effects in some contexts. Factors such as lagged investment returns, measurement problems or the law of diminishing returns in more developed economies could be discussed.

Response 2: We thank the reviewer for this important suggestion. We have added a discussion of heterogeneous and sometimes counterintuitive effects of health and education investments in the section 5 Conclusions, Limitations and Implications. The additions are highlighted in color Blue.

Reviewer 2 Report

Comments and Suggestions for Authors

This paper investigates the heterogeneous effects of human capital investment on labor force participation and income growth across different economic tiers in ASEAN countries. The tiered approach, combined with advanced econometric modeling (BART, Bayesian DNMPM, tvSURE), provides nuanced insights that go beyond traditional panel regressions. The inclusion of institutional quality and macroeconomic control variables is a strong point.

Comment 1:

The methodological sections are dense and mathematical, with limited intuitive explanation. For a broader economics audience, a simplified conceptual diagram of the modeling workflow would help. Some parameters (e.g., β’s, δ’s, τ’s) are presented without a clear economic interpretation in-text. The meaning of effect sizes should be linked back to real-world impacts (e.g., “A 1% increase in education spending in mid-tier countries corresponds to X% change in labor force participation”).

Comment 2:

Expand on surprising findings such as negative coefficients for health/education in some tiers or positive crisis effects and explore possible causes, including institutional, measurement, or short-run adjustment effects.

Comment 3:

Create a summary table or figure that compares findings across top, mid, and low-tier groups to highlight where human capital investments are most effective, least effective, and why.

Comment 4:

Translate findings into tier-specific recommendations for ASEAN policymakers, showing which type of investment yields the best returns given their current institutional context.

Author Response

Reviewer 2: Comments and Suggestions for Authors

This paper investigates the heterogeneous effects of human capital investment on labor force participation and income growth across different economic tiers in ASEAN countries. The tiered approach, combined with advanced econometric modeling (BART, Bayesian DNMPM, tvSURE), provides nuanced insights that go beyond traditional panel regressions. The inclusion of institutional quality and macroeconomic control variables is a strong point.

 

Comment 1: The methodological sections are dense and mathematical, with limited intuitive explanation. For a broader economics audience, a simplified conceptual diagram of the modeling workflow would help. Some parameters (e.g., β’s, δ’s, τ’s) are presented without a clear economic interpretation in-text. The meaning of effect sizes should be linked back to real-world impacts (e.g., “A 1% increase in education spending in mid-tier countries corresponds to X% change in labor force participation”).

Response 1: We thank the reviewer for the helpful suggestion. While we agree that conceptual diagrams and direct real-world effect translations can aid interpretation, we have chosen to retain the current presentation for the following reasons. Our focus is on advanced Bayesian panel modeling (BART, DNMPM, and tvSURE), which involves multiple time-varying and tier-specific parameters. Translating every coefficient into immediate “real-world percentage changes” could oversimplify these complex dynamics and potentially mislead readers regarding lagged or heterogeneous effects. We have, however, clarified the economic interpretation of key parameters (β’s and δ’s) throughout the Results section to provide intuition about their direction and relative magnitude.

 

 

 

Comment 2: Expand on surprising findings such as negative coefficients for health/education in some tiers or positive crisis effects and explore possible causes, including institutional, measurement, or short-run adjustment effects.

Response 2: Thank you very much for this valuable suggestion. We have added the subsection of small discussion the surprising findings, such as negative coefficients for health and education in some tiers and positive crisis effects, and possible causes including institutional factors, measurement issues, and short-run adjustment effects. The addition is highlighted in color Blue in Section 5.

 

Comment 3: Create a summary table or figure that compares findings across top, mid, and low-tier groups to highlight where human capital investments are most effective, least effective, and why.

Response 3: We thank the reviewer for this constructive suggestion. In response, we created a new summary table (Table 5, highlighted in blue in the manuscript) that compares findings across top-, mid-, and low-tier groups. This table synthesizes where human capital investments are most effective and least effective, clarifying cross-tier patterns.

 

 

Comment 4: Translate findings into tier-specific recommendations for ASEAN policymakers, showing which type of investment yields the best returns given their current institutional context.

Response 4: Thank you very much for this suggestion. In response, we have expanded Section 5 to include tier-specific policy recommendations derived directly from our findings. Specifically, we outline how top-tier ASEAN economies should strengthen education quality and lifelong learning to complement strong healthcare systems, how mid-tier economies should prioritize public health expansion while improving education quality, and how low-tier economies should focus first on institutional strengthening and infrastructure before scaling up human capital investments. These additions ensure that our results are explicitly translated into actionable guidance for policymakers across the three ASEAN tiers. They are highlighted in color Blue.