Rule of Law, Development and Human Capabilities

Abstract

This paper examines the impact of the rule of law on human capabilities. Amartya Sen has argued and provided evidence that improvements in economic development do not necessarily lead to human capabilities. Human capabilities are defined as non-monetary factors that improve well-being such as life expectancy, infant mortality, malnutrition, environmental factors, and education. We estimate the impact of the rule of law on human capabilities by using an instrumental variables approach. We instrument the level of development with an index for the rule of law. There is little theoretical reason to expect the rule of law to directly impact human capabilities. We then use the predicted values of development to determine if the economic development is positively correlated with human capabilities. We find that there is a positive relationship between and most measures of human capabilities. We find no such relationship when examining environmental factors that is likely the result of the small number of observations.

JEL Classification: B53, O15, O43,