Transforming Gross Domestic Product into Human Development: Concept and Determinants of Social Efficiency

Abstract

Social efficiency evaluates how many countries, cities, or regions can translate gross domestic product (or other financial means) into human capability expansion (human development). A set of articles have applied several methods, mainly data envelopment analysis, to compare the social efficiency of different places, but little is known about the determinants of social efficiency. To address this gap, we investigate to what extent productive structures, institutions, and geography, standard variables in development economics, are associated with the social efficiency index (SEI) and its two components: Education and Health SEI. Our main finding reveals the significance of the productive structure sophistication, as measured by the economic complexity index, as a pivotal determinant of social efficiency worldwide. Moreover, our analysis elucidates those better institutions, characterized by reduced corruption and greater government effectiveness, correlate positively with social efficiency. Conversely, our study reveals a negative association between high levels of urbanization and social efficiency. Additionally, we observe that the influence of latitude-distance, serving as a proxy for tropical climate, exhibits a very low coefficient, that is only significant for education social efficiency.