The Quality of Institutions and Quality of Development

The positive influences of institutions to economic growth, commonly measured by GDP per capita, have been intensively tested by many empirical studies. However, as the challenges of pollution, corruption, and inequality raise up, the quality of economic development and how to achieve the good quality development have become an unavoidable issues. This paper attempts to establish a comprehensive performance measurement for economic development and explores the connections between the quality of institutions and the quality of economic development. The good quality economic development is defined as an innovation oriented environmental friendly economic growth with a fair income distribution, and is quantified by six sub-indices. The Quality Development Index (QDI) is formed by using the econometrics methodologies of mean value treatment and Principle Component Analysis (PCA). The World Governance Indicators (Kaufmann, Kraay, and Mastruzzi 2013) is adopted as the indicators of the institutions quality. The Fixed Effected Regression model is employed and the regressions results are tested by GLS and GMM methodologies. The results demonstrate that the quality of institutions have the significant positive impacts to the quality of economic development. This study also approves that the social, politic and economic institutions are interconnected, and the better quality of social and political institutions, such as more equal political and economic rights, better quality of public services and judiciary system, are significantly contribute to the higher performance of innovation, environment protection, and fair income distribution