Institutional Sphere Contribution to Human Development: An Institutional Approach

The main objective of this work is to emphasize the importance of integrating the institutional indicator component for evaluating human development. To this aim, we propose a human development composite index (HDCI), which oversteps the HDI published by the UNDP. Our HDCI takes into account the three economic, social and institutional spheres. We used as institutional indicators, those of Kaufmann, Kraay and Mastruzzi (KKZ) for a sample of 178 countries. We reclassified these countries in an increasing order of HDCI to estimate the differences compared to the HDI. We identified four groups of countries at different development levels (HDCI). We found, for every group, countries outgoing and countries entering from the initial HDI classification towards lower or superior levels of HDCI according to the importance of their institutional sphere. Finally, to provide a comprehensive analysis of interrelationships among the determinants Human Development, we make a sensitivity analysis using Borda rule, equal weight method and the principal components approach. We show that various measures of HDCI are highly sensitive to indicators that are considered in the construction, and how measurable indicators are aggregated and weighted to arrive at HDCI.