Determinants of Human Capital Development and Macroeconomic Freedoms: DEA Modelling

Abstract

The purpose of the study is to identify countries with mechanisms to most effectively ensure that human capital losses do not become an obstacle to strengthening macroeconomic freedoms. The study is based on the hypothesis that a decrease in absence from work due to personal health problems, unemployment, and mortality leads to an increase in the level of six basic macroeconomic freedoms: business, labour, trade, investment, monetary, and financial freedoms. In this case, absence from work due to personal health problems, unemployment, and mortality serve as discouragers/inhibitors of human capital development, the growth of which reduces the chances of an employee obtaining the necessary knowledge and skills to effectively transform this employee’s labour into an economic asset. To generalise the scientific opinion on the studied issue, a bibliometric analysis of the relationship between each of these factors and the totality of all macroeconomic freedoms was carried out using the R Bibliometrix package in RStudio software. The basis of this analysis was formed by the databases of publications indexed by Scopus for 1937–2024, consisting of 1618, 1578, and 1517 literature sources for each factor-destimulator. This analysis allowed us to form clouds of the most used keywords and analyse the dynamics of their use, see how the relevant research areas and the keywords used have evolved, build a topic map of the research interface, etc. The information base of the study is the statistical data of Europa and the Heritage Foundation; the object is 30 European countries; the time horizon is 2021; the main method is the non-parametric method of Data Envelopment Analysis (CCR and BCC models); the software package is the rDEA and Benchmarking package in the R programming language. Frontier graphs were constructed that clearly show the efficiency frontier in the CCR and BCC orientations. Six iterations of DEA modelling were carried out, each using only one of the 6 indicators of macroeconomic freedom as an output and three indicators of human capital as inputs. The countries with the most effective national mechanisms to ensure that human capital losses do not become an obstacle to strengthening macroeconomic freedoms are Cyprus, Czech Republic, Iceland, Ireland, Malta, and Romania. These countries demonstrate “benchmark” efficiency in 6 cases out of 6 calculated. There is also a group of countries that have never been included in the list of “benchmark” countries: Austria, Belgium, Croatia, Estonia, France, Hungary, Greece, Italy, Lithuania, Latvia, Portugal, Serbia, Slovakia, and Spain. We have also identified countries that are “benchmark” not by all parameters, but only by certain ones: Bulgaria – only in terms of the impact of the studied human capital determinants on monetary freedom; Luxembourg – only on investment freedom and financial freedom; Poland – only on investment freedom.