The Impact of Social Justice on Economic Performance

A large body of literature shows that institutions positively impacts economic
performance. This study proposes that social justice which is an essential virtue of
institutions also positively influences economic performance. We build the case that
social justice affects capital, human capital and technology accumulation. This in turn
positively drives economic performance. The hypothesis is empirically supported with a
cross-sectional analysis of OECD countries and panel data analysis of EU countries.
The results are robust under Instrument Variable (IV) analysis and numerous controls.
The examination also determines that social justice contributes significantly to the
traditional neoclassical model that relates output to the stock of human and physical
capital. Consequently, the results imply that if a country such as Turkey is able to raise
its rating to the level of Nordic countries (e.g. Norway), GDP per capita may increase
from 10,000 USD to 56,000 USD.