ISLAMICITY AND GLOBAL COMPETITIVENESS: A CROSS-NATIONS PATH ANALYSIS Muchdie

Muchdie Department of Management, Post Graduate School, Muhammadiyah University of Prof. DR. HAMKA Jl. Buncit Raya No. 17, Pancoran, Jakarta Selatan 12790, Indonesia ...................................................................................................................... Manuscript Info Abstract ......................... ........................................................................ Manuscript History


ISSN: 2320-5407
Int. J. Adv. Res. 4 (11), 818-828 819 The Global Competitiveness Report is a yearly report published by the World Economic Forum. Since 2004, the Global Competitiveness Report ranks countries based on the Global Competitiveness Index, developed by Martin and Artadi (2004). The Global Competitiveness Index integrates the macroeconomic and the micro aspects of competitiveness into a single index.
Islam is the religion that is a complete way of life. Nothing is too small or too big to be covered by the teachings of Islam. Rejoice and be happy, remain positive and be at peace. This is what Islamic teaching about happiness (Al Qarni, 2003). Every single one of God's commandments aims to bring happiness to the individual. This applies in all aspects of life, worship, economics, and society (Stacey, A, 2011). Rehman, S.S., & Askari, H., (2010a; 2010b) develop an index to measure the "Islamicity" of 208 countries adherence to Islamic principles using four subindices related to economics, legal and governance, human and political rights, and international relations. Further,  continue to measure Islamicity index and published Islamicity ranking for 2015.In order to measure the Islamicity of the countries in their study, Aksari et al., (2016) divided Islamic teachings into the following four dimensions: economic Islamicity, legal and governance, human and political right and international relation with overall Islamicity representing the fifth.So far, no study has been conducted to test the correlation between competitiveness and Islamicity; vice versa.
Other factor that seems related global competitiveness is human development, a development approach developed by the economist Ul-Haq (2003), is anchored in the Nobel laureate Amartya Sen's work on human capabilities (Sen, A., 2005). It involves studies of the human condition with its core being the capability approach. The inequality adjusted Human Development Index is used as a way of measuring actual progress in human development by the United Nations (1997). It is an alternative approach to a single focus on economic growth, and focused more on social justice, as a way of understanding progress.
The concept of human developments was first laid out by Zaki Bade, a 1998 Nobel Laureate, and expanded upon by Nussbaum (2000;, and Alkire (1998). Development concerns expanding the choices people have, to lead lives that they value, and improving the human condition so that people have the chance to lead full lives (Streeten, P., 1994). Thus, human development is about much more than economic growth, which is only a means of enlarging people's choices. Fundamental to enlarging these choices is building human capabilities. Capabilities are the substantive freedoms a person enjoys to lead the kind of life they have reason to value (WHO, 2016). Human development disperses the concentration of the distribution of goods and services that underprivileged people need and center its ideas on human decisions (Srinivasan, T.N., 1994). By investing in people, we enable growth and empower people to pursue many different life paths, thus developing human capabilities. The most basic capabilities for human development are: to lead long and healthy lives, to be knowledgeable, to have access to the resources and social services needed for a decent standard of living, and to be able to participate in the life of the community. Without these, many choices are simply not available, and many opportunities in life remain inaccessible.
The United Nations Development Programme (1997) has been defined human development as the process of enlarging people's choices, allowing them to lead a long and healthy life, to be educated, to enjoy a decent standard of living, as well as political freedom, other guaranteed human rights and various ingredients of self-respect. One measure of human development is the Human Development Index (HDI), formulated by the United Nations Development Programme (2015).The index encompasses statistics such as life expectancy at birth, an education index calculated using mean years of schooling and expected years of schooling, and gross national income per capita. Though this index does not capture every aspect that contributes to human capability, it is a standardized way of quantifying human capability across nations and communities. Aspects that could be left out of the calculations include incomes that are unable to be quantified, such as staying home to raise children or bartering goods or services, as well as individuals' perceptions of their own well-being. The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions (UNDP, 2015).
This paper aimed to analyze the impact, direct and indirect, of Islamicity on global competitiveness with human development as moderating variable, using path analysis model.

Methods of Analysis:-
In analyzing direct and indirect impacts of Islamicity on global competitiveness, this study employed path analysis model, that was developed around 1918 by Sewall Wright, who wrote about it extensively in the 1920s and 1930s (Wright, S., 1921;1934). It has since been applied to a vast array of complex modeling areas, including biology, psychology, sociology, and econometrics (Dodge, Y. (2003). Basically, the path model can be used to analysis two types of impacts: direct and direct impacts. The total impacts of exogenous variables are the multiplication (Alwin, D.F., & Hauser, R.M., 1975). In this study, the path model is depicted in Figure 1, where Islamicity and human development were the exogenous variables.

Figure 1:Path Model to Analysis the Impact of Islamicity on Global Competitiveness
Path coefficients were calculated by solving these path equations; given the coefficients of correlation have been calculated. P 31 was direct impact of Islamicity global competitiveness, P 21 was direct impact of Islamicity on human development; P 32 was direct impact of human development on global competitiveness, and indirectly through P 21 and P 32 were the impacts of Islamicity on global competitiveness. Table1:Path Equations 1). r 12 = P 21 2). r 13 = P 31 + P 32 r 12 3).r 23 = P 31 r 12 + P 32 Source:http://faculty.cas.usf.edu/mbrannick/regression/Pathan.html Competitiveness was measured by the Global competitiveness index, Islamicity was measured by Islamicity index and human development was measured by Human development index. Data on global competitiveness index from 138 countries were downloaded from http://reports.weforum.org/global-competitiveness-index/. Data on Islamicity from 153 countries (115 countries from Islamic countries) downloaded from Islamicity Index.org that available on line at http://islamicity-index.org/wp/islamicity-indices. Data on human development index from 155 countries download from UNDP (2016) Human Development Report 2015: Work for Human Development Web Version and available at http://hdr.undp.org/en/data. Problems of missing data were solved by deleting countries with incomplete data. Finally, data on the happiness, economic growth and human development used in this study were from 123 countries. Georgia, Turkey, Jordan, Macedonia, Azerbaijan, and Ukraine) and mode was 73.00 (the Netherland, Sweden, New Zealand, and Australia). Finally, the highest global competitiveness index was 5.76 (Switzerland) and the lowest global competitiveness index was 2.84 (Guinea). Average index of global competitiveness in term of statistic mean was 42.72 (Slovenia, Macedonia, Colombia, and Hungary), median was 42.2 (Slovak Republic, and Georgia), and mode 43.9 (Malta, South Africa, and Philippines).  Table 2: presents the countries at various levels Islamicity index related to global competitiveness index. Both were ranked into three levels: low, medium and high. According to the levels of the Islamicity index, 41 countries classified as the low Islamicity index countries, 41 countries classified as the medium Islamicity index countries, and 41 countries classified as the high Islamicity index countries. The same number of countries was also classified as low, medium and high human development index countries.  Countries with high global competitiveness index were also the countries with high Islamicity index. The opposite apply; countries with low global competitiveness index were also the countries with low Islamicity index. The higher the Islamicity indexes of a country, the higher the index of global competitiveness in that country. Regression coefficient resulted from regression analysis was a positive, 3.16. This regression coefficient was statistically significant as t-calculated (19.89) was higher than t-table (1.98) n=123, at 95% significant level, and P-value (0.00) was less than 0.05.   The countries with high Islamicity index were the counties with high human development index. The higher the Islamicity indexes of a country, the higher the index of human development in that country. Regression coefficient resulted from regression analysis was a positive, 6.95. This regression coefficient was statistically significant as t-calculated (18.81) was higher than t-table (1.98) n=123, at 95% significant level, and P-value (0.00) was less than 0.05. Table 4: presents the countries at various levels human development index related to the global competitiveness index. Both were ranked into three levels: low, medium and high. According to the levels of human development index, 41 countries classified as the low human development index countries, 41 countries classified as the medium human evelopment index countries, and 41 countries classified as the high development index countries. The same number of countries was also classified as low, medium and high global competitiveness index countries.  Regression coefficient resulted from regression analysis was a positive, 0.37. This regression coefficient was statistically significant as t-calculated (16.11) was higher than t-table (1.98) n=123, at 95% significant level, and Pvalue (0.00) was less than 0.05.