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Institutional reforms and human capital

Author

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  • Balatsky, E.

    (Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia
    Financial University under the Government of the Russian Federation, Moscow, Russia)

Abstract

The article focuses on the interaction between institutional reforms and human capital. The Stevenson depopulation phenomenon is the starting point of the analysis. The stylized examples allow to highlight the impact of reforms on human capital, including vitality, health and life expectancy. Within the framework of an interdisciplinary approach, it is shown that many psychologists, sociologists, political scientists, doctors and linguists share the opinion about the impact of institutional changes on the viability of the population. The proposed simple model of economic growth demonstrates the principle of the need to dose reforms, i.e. to limit their scale, depth and speed of implementation. This strategy in contrast to shock therapy is called adaptive reform. The article examines the interaction between institutional reforms and human capital. As a starting point of the analysis, the phenomenon of Stevenson's depopulation is used, which consists in the mass extinction of the natives of Polynesia under the influence of the forceful imposition of new standards of life by the colonists. These stylized examples allow us to focus on the impact of reforms on human capital in terms of the vitality, health and life expectancy of an individual. The analogy between the phenomenon of Stevenson's depopulation and the decrease in the population during the institutional reforms in Russia in the 90s is considered. Within the framework of an interdisciplinary approach, it is shown that many psychologists, sociologists, political scientists, doctors and linguists share the opinion about the impact of institutional changes on the viability of the population. The main thesis of these studies: a person's health is not only inside him (his body and consciousness), but also outside (in the social environment and psychological environment). A simple model of economic growth is proposed, from which the paradox of reforms follows, when productive institutional changes generate an economic downturn. The analysis of the conditions for the emergence of this paradox shows that the scale, depth and speed of reforms should be strictly dosed, otherwise their negative impact on people can outweigh the positive organizational effect inherent in them. It is shown that in addition to institutional changes, technological progress also has a destructive impact on human capital, which is also incorporated into the proposed model of economic growth.

Suggested Citation

  • Balatsky, E., 2021. "Institutional reforms and human capital," Journal of the New Economic Association, New Economic Association, vol. 51(3), pages 103-124.
    • Handle: RePEc:nea:journl:y:2021:i:51:p:103-124
    DOI: 10.31737/2221-2264-2021-51-3-5
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    institutions; reforms; economic growth; adaptive reform; human capital;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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