Abstract:
Sustainable development in the Global South faces a complex challenge, influenced
by environmental, economic, and social factors, as well as issues like poor governance, political
instability, and inequality. The literature emphasizes that institutions are crucial in shaping
incentives and behaviors that drive development. Inclusive institutions foster sustainability by
providing equitable opportunities, safeguarding property rights, and encouraging innovation,
whereas extractive institutions—marked by unequal systems and a lack of basic liberties—
hinder progress. This research examines how economic and political institutions affect
sustainable development in 94 developing countries from 1990 to 2019. Sustainable
development, defined as the ecological efficiency of human development, is measured using
the Sustainable Development Index (SDI) introduced by Hickel (2020). Economic institutions
are measured using two indicators: economic freedom and de jure economic globalization,
while political institutions are evaluated via de jure political globalization, judicial
independence, democracy, and civil liberties. The empirical analysis shows that all indicators
of inclusive institutions positively influence sustainable development in the Global South.
Moreover, democracy proved to be the most effective in promoting sustainability, while the
effect of de jure political globalization was the weakest in terms of magnitude (though still
statistically significant). These findings underscore the vital role of inclusive institutions in
achieving sustainability, highlighting their capacity to balance development goals with
environmental considerations. This study demonstrates that democracy enhances sustainable
development more than economic liberalization in the Global South, challenging conventional
policy priorities.
