STRUCTURAL TRANSFORMATION AND SUSTAINABLE DEVELOPMENT: ANALYSIS OF THE SEQUENTIAL RELATIONSHIP AMONG SOCIAL, POLITICAL, AND ECONOMIC CAPACITIES

Abstract This study examined the sequential relationships among Social Capacity, Political Capacity, Economic Capacity, and Sustainable Development using a balanced panel of 132 countries from 2002–2023 (N = 2,904). The variables were proxied by Voice and Accountability, Government Effectiveness, the Economic Complexity Index, and the Planetary-adjusted Human Development Index, respectively. Using System GMM, causal mediation analysis, and Structural Equation Modeling, the findings support a significant sequential pathway linking the three capacities to sustainable development. The results suggest that sustainable development emerges from the interaction of social, political, and economic capacities rather than from economic growth alone. Keywords: Sustainable Development, Structural Transformation, Social Capacity, Political Capacity, Economic Capacity, Government Effectiveness, Economic Complexity, PHDI