Human development and economics growth in transition economies: the role of institutions

Abstract

Transition economies (i.e. Central Eastern Europe Countries and Former Soviet Union Republics) have undergone an enormous transformation since 1989-1991. After the recession of the early 1990’s, some of these economies experienced a GDP recovery, at a different pace, with different outcomes in terms of economic growth and social performances (i.e. human development, employment, poverty, etc).

The aim of this paper is to answer the following research question: was human development concurrent with economic growth during transition towards the market economy? I claim that economic growth is not always concurrent with human development. Economic growth can contribute to increase the level of human development, but is not “the means” to human development. Human development is considered to be a process which allows for an environment where people enjoy long, healthy and creative lives. Using an OLS model, human development variables were correlated with GDP per capita. I found out that, in transition economies, human development is a sufficient, yet not a necessary condition for economic growth. In this context institutions and institutional policies are crucial for a development process. In fact, for better distribution and access to resources as well as for social cohesion, well-designed institutions are needed.