POLITICAL AND ECONOMIC INSTITUTIONS AND HUMAN DEVELOPMENT: POST-COMMUNIST NATIONS

The literature has extensively investigated the relationships between country economic and political institutions and human well-being. I assume that economic institutions can be the determinants of human development and provide a more robust explanation of the latter under the influence of political institutions in the 2SLS instrumental variable estimation than in the ordinary least square (OLS) estimation. I also assume that most of the Post-Communist Nations (PCN) were transitioning their economic and social systems focusing on human development, among other critical reforms and programs. Data confirm this assumption for 22 countries out of 25. Results indicate that there were causal relationships between human development and business, monetary, and investment freedom, and freedom from corruption and government spending. Only government spending had a negative effect on human development. Economic, labor, trade, fiscal, and financial freedom were not endogenous variables with strong instruments. Therefore, these institutions did not have a stronger impact on human development. External validation of the estimates using data from the rest of the world confirms the results. All the mentioned economic institutions had a significant impact on human development in the rest of the world under the influence of the same instrumental variables: political rights, civil liberties, property rights, the median age of the population, and geographic location. Government spending again had a significant and negative effect on human development.