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Economic Freedom and Growth: Decomposing the Effects

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Author Info
 Carlsson, Fredrik
Lundstrom, Susanna

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Abstract

Most studies of the relation between economic freedom and growth of GDP have found a positive relation. One problem in this area is the choice of economic freedom measure. A single measure does not reflect the complex economic environment and a highly aggregated index makes it difficult to draw policy conclusions. In this paper we investigate what specific types of economic freedom measures that are important for growth. The robustness of the results is carefully analysed since the potential problem with multicollinearity is one of the negative effects of decomposing an index. The results show that economic freedom does matter for growth. This does not mean that increasing economic freedom, defined in general terms, is good for economic growth since some of the categories in the index are insignificant and some of the significant variables have negative effects. Copyright 2002 by Kluwer Academic Publishers

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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 112 (2002)
Issue (Month): 3-4 (September)
Pages: 335-44
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Handle: RePEc:kap:pubcho:v:112:y:2002:i:3-4:p:335-44

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  5. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  6. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May. [Downloadable!] (restricted)
  7. Torstensson, Johan, 1994. "Property Rights and Economic Growth: An Empirical Study," Kyklos, Blackwell Publishing, vol. 47(2), pages 231-47.
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  10. Scully, Gerald W & Slottje, Daniel J, 1991. " Ranking Economic Liberty across Countries," Public Choice, Springer, vol. 69(2), pages 121-52, February.
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  13. James D. Gwartney & Robert A. Lawson & Randall G. Holcombe, 1999. "Economic Freedom and the Environment for Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 643-, December.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Heckelman, Jac & Knack, Stephen, 2005. "Foreign aid and market-liberalizing reform," Policy Research Working Paper Series 3557, The World Bank. [Downloadable!]
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  2. Hugo Faria & Hugo Montesinos, 2009. "Does economic freedom cause prosperity? An IV approach," Public Choice, Springer, vol. 141(1), pages 103-127, October. [Downloadable!] (restricted)
  3. Christian Bjørnskov, 2005. "Does Political Ideology Affect Economic Growth?," Public Choice, Springer, vol. 123(1), pages 133-146, April. [Downloadable!] (restricted)
  4. Heckelman, Jac C. & Powell, Benjamin, 2008. "Corruption and the Institutional Environment for Growth," Working Papers 2008-6, Suffolk University, Department of Economics. [Downloadable!]
  5. Christopher Robertson & K. Gilley & William Crittenden, 2008. "Trade Liberalization, Corruption, and Software Piracy," Journal of Business Ethics, Springer, vol. 78(4), pages 623-634, April. [Downloadable!] (restricted)
  6. Kimlong Chheng, 2005. "How Do Economic Freedom and Investment Affect Economic Growth?," Macroeconomics 0509021, EconWPA. [Downloadable!]
  7. Isabel Sanz Villarroya, 2007. "Los resultados macroeconómicos y la posición relativa de la economía argentina: 1875-2000," Working Papers in Economic History wp07-04, Universidad Carlos III, Departamento de Historia Económica e Instituciones. [Downloadable!]
  8. Lundström, Susanna, 2002. "Decomposed Effects of Democracy on Economic Freedom," Working Papers in Economics 74, Göteborg University, Department of Economics. [Downloadable!]
  9. Berggren, Niclas & Jordahl, Henrik, 2003. "Does Free Trade Really Reduce Growth? Further Testing Using the Economic Freedom Index," Working Paper Series 2003:26, Uppsala University, Department of Economics. [Downloadable!]
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  10. Rami Abdelkafi & Hatem Derbel, 2008. "The effects of economic freedom components on economic growth: an analysis with a threshold model," EconomiX Working Papers 2008-3, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  11. Rami Abdelkafi & Hatem Derbel, 2008. "Une décomposition de l'effet de la liberté économique sur la croissance dans les pays en développement," EconomiX Working Papers 2008-19, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  12. Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute. [Downloadable!]
  13. Lundström, Susanna, 2003. "Effects of Economic Freedom on Growth and the Environment - Implications for Cross-Country Analysis," Working Papers in Economics 115, Göteborg University, Department of Economics. [Downloadable!]
  14. Bernd Hayo & Stefan Voigt, 2003. "Explaining de facto judicial independence," ICER Working Papers 01-2004, ICER - International Centre for Economic Research. [Downloadable!]
    Other versions:
  15. Carlsson, Fredrik & Lundström, Susanna, 2000. "The Effects of Economic and Political Freedom on CO2 Emissions," Working Papers in Economics 29, Göteborg University, Department of Economics, revised 21 Aug 2001. [Downloadable!]
  16. Martin Gassebner & Noel Gaston & Michael Lamla, 2008. "The Inverse Domino Effect: Are Economic Reforms Contagious?," KOF Working papers 08-187, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
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  17. Christian Bjørnskov & Nicolai Foss, 2008. "Economic freedom and entrepreneurial activity: Some cross-country evidence," Public Choice, Springer, vol. 134(3), pages 307-328, March. [Downloadable!] (restricted)
    Other versions:
  18. Tue Gørgens & Martin Paldam & Allan H. Würtz, 2005. "Growth, Income and Regulation: a Non-Linear Approach," CAM Working Papers 2005-12, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
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