Human Development and Quality of Institutions in Highly Developed Countries

Abstract

The article concentrates on the problem of influence of quality of institutional system in the context of utilizing the potential of knowledge-based economy on the human development in highly developed countries. In order to measure the quality of institutional system the proposed synthetic measure with multivariate analysis - TOPSIS method based on the data available from Fraser Institute was obtained. As diagnostic variables of quality of institutions 29 variables qualified to four aspects of quality of national institutional systems were used: a) formal regulations influencing entrepreneurship; b) effectiveness of juridical system in keeping low level of transaction costs and supporting effectiveness of market mechanism; c) competitive pressure and effectiveness of labour markets; d) financial markets institutions as a stimulator of development of enterprises with high growth potential. Human Development Index proposed within United Nations Development Programme was used for measuring the quality of life. The estimation of relation between institutions and human development was made with econometric dynamic panel model. The estimation was made for 24 European Union countries for the years 2004-2010. The econometric analysis shows the positive influence of quality of institutions on human development in the context of knowledge-based economy in highly developed countries.