IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i4p2380-d504103.html
   My bibliography  Save this article

The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries

Author

Listed:
  • Jonas Rapsikevicius

    (School of Economics and Business, Kaunas University of Technology, 44239 Kaunas, Lithuania)

  • Jurgita Bruneckiene

    (School of Economics and Business, Kaunas University of Technology, 44239 Kaunas, Lithuania)

  • Mantas Lukauskas

    (Faculty of Mathematics and Natural Sciences, Kaunas University of Technology, 44239 Kaunas, Lithuania)

  • Sarunas Mikalonis

    (School of Economics and Business, Kaunas University of Technology, 44239 Kaunas, Lithuania)

Abstract

The EU Green Deal and its impact on economic transformation provoked a slightly forgotten free market vs. market regulation discussion, but in the light of a new context—economic and environmental performance development. The economic shock caused by COVID-19, which transformed economies and societies, intensified this discussion. This article analyses the impact of economic freedom on economic performance and environmental performance in European countries. The article contributes to a gap in the literature, because, to date, research has examined the effects of economic freedom, or some of its components, on economic or environmental measures in groups of nations with a lacking sustainable development context. In addition, the mixed results obtained led to confusion in perceptions and knowledge about the influence and usefulness of economic freedom for economic and environmental performance. We also found mixed results regarding the influence of economic freedom on economic and environmental performance, but the introduction of a new concept—the optimal level of economic freedom—organized the different results into a coherent logical sequence. The paper provides original empirical evidence and specifies the targets of structural reforms. The results are thus useful for policymakers to develop more appropriate and efficient economic freedom.

Suggested Citation

  • Jonas Rapsikevicius & Jurgita Bruneckiene & Mantas Lukauskas & Sarunas Mikalonis, 2021. "The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2380-:d:504103
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/4/2380/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/4/2380/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jan-Egbert Sturm & Jakob De Haan, 2001. "How robust is the relationship between economic freedom and economic growth?," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 839-844.
    2. Matteo Cacciatore & Giuseppe Fiori, 2016. "The Macroeconomic Effects of Goods and Labor Marlet Deregulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 1-24, April.
    3. Romain Duval & Davide Furceri, 2018. "The Effects of Labor and Product Market Reforms: The Role of Macroeconomic Conditions and Policies," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(1), pages 31-69, March.
    4. Jakob De Haan & Susanna Lundström & Jan‐Egbert Sturm, 2006. "Market‐oriented institutions and policies and economic growth: A critical survey," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 157-191, April.
    5. Philippe Aghion & Emmanuel Farhi & Enisse Kharroubi, 2019. "Monetary Policy, Product Market Competition and Growth," Economica, London School of Economics and Political Science, vol. 86(343), pages 431-470, July.
    6. Goodness C. Aye & Prosper Ebruvwiyo Edoja, 2017. "Effect of economic growth on CO2 emission in developing countries: Evidence from a dynamic panel threshold model," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1379239-137, January.
    7. Haidar, Jamal Ibrahim, 2012. "The impact of business regulatory reforms on economic growth," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 285-307.
    8. Lin, Boqiang & Ge, Jiamin, 2021. "Does institutional freedom matter for global forest carbon sinks in the face of economic development disparity?," China Economic Review, Elsevier, vol. 65(C).
    9. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2013. "Do Product Market Regulations In Upstream Sectors Curb Productivity Growth? Panel Data Evidence For OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1750-1768, December.
    10. De Grauwe, Paul & Ji, Yuemei, 2020. "Structural reforms, animal spirits, and monetary policies," European Economic Review, Elsevier, vol. 124(C).
    11. Angulo-Guerrero, María J. & Pérez-Moreno, Salvador & Abad-Guerrero, Isabel M., 2017. "How economic freedom affects opportunity and necessity entrepreneurship in the OECD countries," Journal of Business Research, Elsevier, vol. 73(C), pages 30-37.
    12. Balázs Égert, 2016. "Regulation, Institutions, and Productivity: New Macroeconomic Evidence from OECD Countries," American Economic Review, American Economic Association, vol. 106(5), pages 109-113, May.
    13. Ivana Brkić & Nikola Gradojević & Svetlana Ignjatijević, 2020. "The Impact of Economic Freedom on Economic Growth? New European Dynamic Panel Evidence," JRFM, MDPI, vol. 13(2), pages 1-13, February.
    14. Rios, Vicente & Gianmoena, Lisa, 2018. "Convergence in CO2 emissions: A spatial economic analysis with cross-country interactions," Energy Economics, Elsevier, vol. 75(C), pages 222-238.
    15. Martin Gassebner & Noel Gaston & Michael J. Lamla, 2011. "The Inverse Domino Effect: Are Economic Reforms Contagious?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 183-200, February.
    16. Allen, Franklin & Gu, Xian & Kowalewski, Oskar, 2012. "Financial crisis, structure and reform," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 2960-2973.
    17. Vito Tanzi, 2005. "The Economic Role Of The State In The 21st Century," Cato Journal, Cato Journal, Cato Institute, vol. 25(3), pages 617-638, Fall.
    18. Mohammed Ershad Hussain & Mahfuzul Haque, 2016. "Impact of Economic Freedom on the Growth Rate: A Panel Data Analysis," Economies, MDPI, vol. 4(2), pages 1-15, March.
    19. Duval, Romain, 2008. "Is there a role for macroeconomic policy in fostering structural reforms? Panel evidence from OECD countries over the past two decades," European Journal of Political Economy, Elsevier, vol. 24(2), pages 491-502, June.
    20. Wen, Jun & Hao, Yu & Feng, Gen-Fu & Chang, Chun-Ping, 2016. "Does government ideology influence environmental performance? Evidence based on a new dataset," Economic Systems, Elsevier, vol. 40(2), pages 232-246.
    21. Leif van Neuss, 2019. "The Drivers Of Structural Change," Journal of Economic Surveys, Wiley Blackwell, vol. 33(1), pages 309-349, February.
    22. Bjørnskov, Christian, 2016. "Economic freedom and economic crises," European Journal of Political Economy, Elsevier, vol. 45(S), pages 11-23.
    23. Psillaki, Maria & Mamatzakis, Emmanuel, 2017. "What drives bank performance in transitions economies? The impact of reforms and regulations," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 578-594.
    24. Horst Feldmann, 2012. "Product Market Regulation and Labor Market Performance around the World," LABOUR, CEIS, vol. 26(3), pages 369-391, September.
    25. Nadasi Levente, 2015. "How Does Economic Freedom Influence The Relationship Between Government Size And Convergence?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 623-630, July.
    26. Sajedi, Rana, 2018. "Fiscal consequences of structural reform under constrained monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 93(C), pages 22-38.
    27. Kešeljević, Aleksandar & Spruk, Rok, 2013. "Global distribution and dynamics of economic freedom: Non-parametric approach," Economic Modelling, Elsevier, vol. 33(C), pages 560-571.
    28. Papageorgiou, Dimitris & Vourvachaki, Evangelia, 2017. "Macroeconomic effects of structural reforms and fiscal consolidations: Trade-offs and complementarities," European Journal of Political Economy, Elsevier, vol. 48(C), pages 54-73.
    29. Constantine Alexandrakis & Grigorios Livanis, 2013. "Economic Freedom and Economic Performance in L atin A merica: A Panel Data Analysis," Review of Development Economics, Wiley Blackwell, vol. 17(1), pages 34-48, February.
    30. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
    31. Guangdong Xu, 2011. "The Role Of Law In Economic Growth: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 833-871, December.
    32. Steven Sorrell, 2010. "Energy, Economic Growth and Environmental Sustainability: Five Propositions," Sustainability, MDPI, vol. 2(6), pages 1-26, June.
    33. Carlsson, Fredrik & Lundstrom, Susanna, 2002. "Economic Freedom and Growth: Decomposing the Effects," Public Choice, Springer, vol. 112(3-4), pages 335-344, September.
    34. Horst Feldmann, 2006. "Credit Market Regulation and Labor Market Performance Around the World," Kyklos, Wiley Blackwell, vol. 59(4), pages 497-525, November.
    35. Gomes, Sandra, 2018. "Euro area structural reforms in times of a global crisis," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 28-45.
    36. Rieth, Malte & Wittich, Jana, 2020. "The impact of ECB policy on structural reforms," European Economic Review, Elsevier, vol. 122(C).
    37. Doreen Fedrigo-Fazio & Jean-Pierre Schweitzer & Patrick Ten Brink & Leonardo Mazza & Alison Ratliff & Emma Watkins, 2016. "Evidence of Absolute Decoupling from Real World Policy Mixes in Europe," Sustainability, MDPI, vol. 8(6), pages 1-22, May.
    38. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    39. Qureshi, Muhammad Imran & Qayyum, Shazia & Nassani, Abdelmohsen A. & Aldakhil, Abdullah Mohammed & Qazi Abro, Muhammad Moinuddin & Zaman, Khalid, 2019. "Management of various socio-economic factors under the United Nations sustainable development agenda," Resources Policy, Elsevier, vol. 64(C).
    40. Richard L. Stroup, 2003. "Economic freedom and environmental quality," Proceedings, Federal Reserve Bank of Dallas, issue Oct, pages 73-90.
    41. Fabio Schiantarelli, 2016. "Do product market reforms stimulate employment, investment, and innovation?," IZA World of Labor, Institute of Labor Economics (IZA), pages 266-266, June.
    42. Kasman, Adnan & Duman, Yavuz Selman, 2015. "CO2 emissions, economic growth, energy consumption, trade and urbanization in new EU member and candidate countries: A panel data analysis," Economic Modelling, Elsevier, vol. 44(C), pages 97-103.
    43. Jarand H Aarhus & Tor G Jakobsen, 2019. "Rewards of reforms: Can economic freedom and reforms in developing countries reduce the brain drain?," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 22(4), pages 327-347, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Djula Borozan, 2023. "Institutions and Environmentally Adjusted Efficiency," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4489-4510, December.
    2. Wei Wang & Kehui Wei & Oleksandr Kubatko & Vladyslav Piven & Yulija Chortok & Oleksandr Derykolenko, 2023. "Economic Growth and Sustainable Transition: Investigating Classical and Novel Factors in Developed Countries," Sustainability, MDPI, vol. 15(16), pages 1-15, August.
    3. Borozan, Dj, 2022. "Asymmetric effects of policy uncertainty on renewable energy consumption in G7 countries," Renewable Energy, Elsevier, vol. 189(C), pages 412-420.
    4. Elena C. Prenovitz & Peter K. Hazlett & Chandler S. Reilly, 2023. "Can Markets Improve Recycling Performance? A Cross-Country Regression Analysis and Case Studies," Sustainability, MDPI, vol. 15(6), pages 1-18, March.
    5. Yu-Xia Tu & Oleksandr Kubatko & Vladyslav Piven & Bohdan Kovalov & Mykola Kharchenko, 2023. "Promotion of Sustainable Development in the EU: Social and Economic Drivers," Sustainability, MDPI, vol. 15(9), pages 1-15, May.
    6. Hui Deng & Chuang Li & Liping Wang, 2022. "The Impact of Corporate Innovation on Environmental Performance: The Moderating Effect of Financing Constraints and Government Subsidies," Sustainability, MDPI, vol. 14(18), pages 1-18, September.
    7. Gamze Sart & Yilmaz Bayar & Marina Danilina & Funda Hatice Sezgin, 2022. "Economic Freedom, Education and CO 2 Emissions: A Causality Analysis for EU Member States," IJERPH, MDPI, vol. 19(13), pages 1-14, June.
    8. Jonas Rapsikevičius & Jurgita Bruneckienė & Rytis Krušinskas & Mantas Lukauskas, 2022. "The Impact of Structural Reforms on Sustainable Development Performance: Evidence from European Union Countries," Sustainability, MDPI, vol. 14(19), pages 1-18, October.
    9. Gouider, Abdessalem & Nouira, Ridha & Saafi, Sami, 2022. "Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(3), pages 147-167, September.
    10. Hsu, Ching-Chi & Ngo, Quang-Thanh & Chien, FengSheng & Li, Li & Mohsin, Muhammad, 2021. "Evaluating green innovation and performance of financial development: mediating concerns of environmental regulation," MPRA Paper 109671, University Library of Munich, Germany.
    11. Awoa Awoa, Paul & Oyono, Jean Cedric & Ngah Atangana, Bénédicte & Okere Atanga, Donald & Zeh, Inès Perolde, 2022. "Natural resource and entrepreneurship: Economic freedom matters," Resources Policy, Elsevier, vol. 79(C).
    12. Xiumei Xu & Ruolan Jing & Feifei Lu, 2022. "Environmental Regulation, Corporate Social Responsibility (CSR) Disclosure and Enterprise Green Innovation: Evidence from Listed Companies in China," IJERPH, MDPI, vol. 19(22), pages 1-24, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tanin, Tauhidul Islam & Masih, Mansur, 2017. "Does economic freedom lead or lag economic growth? evidence from Bangladesh," MPRA Paper 79446, University Library of Munich, Germany.
    2. Bernur Acikgoz & Anthony Amoah Author-Email: a.amoah@uea.ac.uk & Mine Yılmazer, 2016. "Economic Freedom and Growth: A Panel Cointegration Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(5), pages 541-562, December.
    3. Compton, Ryan A. & Giedeman, Daniel C. & Hoover, Gary A., 2011. "Panel evidence on economic freedom and growth in the United States," European Journal of Political Economy, Elsevier, vol. 27(3), pages 423-435, September.
    4. Gouider, Abdessalem & Nouira, Ridha & Saafi, Sami, 2022. "Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(3), pages 147-167, September.
    5. Campos, Nauro F. & De Grauwe, Paul & Ji, Yuemei, 2023. "Structural reforms and economic performance: the experience of advanced economies," LSE Research Online Documents on Economics 120870, London School of Economics and Political Science, LSE Library.
    6. Ivana Brkić & Nikola Gradojević & Svetlana Ignjatijević, 2020. "The Impact of Economic Freedom on Economic Growth? New European Dynamic Panel Evidence," JRFM, MDPI, vol. 13(2), pages 1-13, February.
    7. Jac C. Heckelman & Stephen Knack, 2008. "Foreign Aid and Market‐Liberalizing Reform," Economica, London School of Economics and Political Science, vol. 75(299), pages 524-548, August.
    8. Ana Gouveia & Sílvia Santos & Inês Gonçalves, 2017. "The short-term impact of structural reforms on productivity growth: beyond direct effects," GEE Papers 0065, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
    9. Judit Kapás & Pál Czeglédi, 2007. "Economic Freedom: Theory First, Empiricism After," ICER Working Papers 10-2007, ICER - International Centre for Economic Research.
    10. Justin T. Callais & Jamie Bologna Pavlik, 2023. "Does economic freedom lighten the blow? Evidence from the great recession in the United States," Economics of Governance, Springer, vol. 24(3), pages 357-398, September.
    11. Campos, Nauro F. & Eichenauer, Vera Z. & Sturm, Jan-Egbert, 2020. "Close encounters of the European kind: Economic integration, sectoral heterogeneity and structural reforms," European Economic Review, Elsevier, vol. 129(C).
    12. James E. Payne & James W. Saunoris & Saban Nazlioglu & Cagin Karul, 2023. "The convergence dynamics of economic freedom across U.S. states," Southern Economic Journal, John Wiley & Sons, vol. 89(4), pages 1216-1241, April.
    13. Burcu ŞENALP, 2018. "Foreign Direct Investment, Economic Growth and Economic Freedom: A Literature Survey," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 68(2), pages 301-336, December.
    14. Johan Graafland, 2020. "When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(1), pages 127-153, May.
    15. Kimlong Chheng, 2005. "How Do Economic Freedom and Investment Affect Economic Growth?," Macroeconomics 0509021, University Library of Munich, Germany.
    16. Elchin Suleymanov & Elvin Alirzayev & Mammad Talibli, 2019. "Role of Economic Freedom in Attracting Investments in the Context of Azerbaijan," International Journal of Economics and Financial Issues, Econjournals, vol. 9(1), pages 87-95.
    17. Masuch, Klaus & Anderton, Robert & Setzer, Ralph & Benalal, Nicholai, 2018. "Structural policies in the euro area," Occasional Paper Series 210, European Central Bank.
    18. Bodo Knoll & Hans Pitlik & Martin Rode, 2013. "Economic Freedom, Money and Happiness – Why Deregulation Matters Beyond its Wealth Enhancing Effect," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 35-42, 07.
    19. Daniel L. Bennett & Boris Nikolaev, 2017. "Economic Freedom & Happiness Inequality: Friends Or Foes?," Contemporary Economic Policy, Western Economic Association International, vol. 35(2), pages 373-391, April.
    20. Martin Rode & Julio Revuelta, 2015. "The Wild Bunch! An empirical note on populism and economic institutions," Economics of Governance, Springer, vol. 16(1), pages 73-96, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2380-:d:504103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.