Institutions, Human Capital Productivity and Economic Growth Hadhek Zouhaier * Abstract: This paper aims to study the effect of institutional factors on the economic growth of 37 developed and developing countries 1 during six consecutive five-yearly periodsstarting from 1975 up until 2000, through the use of a dynamic panel data model.The second part of this paper involves an empirical study of the effect that institutions have on the contribution of human capitalto economic growth. The main statements issued from these two empirical tests stipulate a positive interaction between the economic institutions and the country’s human capital within the total sample, a positive interaction between the political rights and the developed countries’ human capital, and the absence of any institutional impact on the economic growth for the three samples. JEL: O43, O47, C23. Keywords: Political institutions; economic institutions; human capital productivity; economic growth; dynamic panel. 1. INTRODUCTION The relationship between institutional framework and business performances has been the subject of several theoretical and empirical works.Indeed, since the leading work by North (1991), attention has been drawn to the importance of institutional factors for the achievement of good results in terms ofeconomic growth and development. In the empirical works seeking to study the relationship between institutional framework and economic growth, a healthy institutional environmentstimulates economic agents– both national and foreign- to invest beforehand in high value-addedactivities and consequently, a durable and sustained economic growth. Conversely, bad quality institutions may increase incertitude, unpredictability, instability, corruption and transaction charges.Within such an institutional environment, private initiative is discouraged especially in terms of material and nonmaterial investment.The consequences are certainly vulnerable economic performances, due to the fact that the mechanisms of growth are blocked and the country’s potentials are limited. To study the relationship between institutions and economic growth, we shall carry out within the framework of this study a data model of economic panel relating to a sample of 37 developed and developing countriesduring six successive five-yearly periods from 1970 to 2000, then subdivided into two groups: 17 developed countries and 20 developing countries. * University of Gabès, Higher Institute of Management of Gabès, (E-mail :hzouhair2000@yahoo.fr.) IJE : Volume 6 • Number 1 • June 2012, pp. 67-80