The Interdependence of Economic Growth, Human Development and Political Institutions

Abstract

The causal links between growth, human development and institutions
are central to understanding the long-run development process.
The turn of the millennium has seen influential research in development
economics attempting to uncover some of these links, but a
focus on root-causes of growth has limited its insights in both scope
and method. This paper provides a fresh analysis of the interdependence
of growth, human development and institutions using a general
equilibrium framework. The framework is tested using 4 different
cross-sectional and panel-data specifications including data
from 1820>. Findings implicate that both growth and human development,
but also human development and institutional progress
strongly depend on each other in the long run. The results imply
the existence of significant general-equilibrium effects shaping the
long-run trajectories of countries. These mechanisms defy overly
deterministic views of development, and invite careful further study.