A PLS PATH MODEL TO INVESTIGATE THE RELATIONS BETWEEN INSTITUTIONS AND HUMAN DEVELOPMENT

Abstract

The paper studies the relations between types of institutions on different components of human development. A role of aggregate demand in determining the material components of human development is assumed. We thus divide institutions into those that create demand and those that are determined by the whole process of development. Similarly we divide human development in its three traditional components (economic development, health, knowledge). Both human development and institutions are assumed as multidimensional constructs; all the main components of these constructs are defined as latent variables, and the relations between them as structural relations. A Partial Least Squares (PLS) path model is developed: it is the aggregation (and simultaneous estimation) of an outer model relating observed or manifest variables to their own latent variable and of a structural model (inner model) relating some endogenous latent variable to other latent variables. From the goodness of fit point of view, our results seem to validate our theoretical assumptions.Structural Equations Models, Institutions, Human Development