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Direct and Indirect Effects of Economic and Political Freedom on Economic Growth

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  • Gema Fabro
  • José Aixalá

Abstract

This paper examines the relative impact of economic freedom, civil liberties, and political rights on growth. A system of three simultaneous equations is used to unearth the channels through which these institutional dimensions affect economic growth. These include greater efficiency and enlarged investment in physical and human capital. The sample contains 79 countries and six periods covering the years from 1976 to 2005. The results show that the three dimensions of institutional quality are important for economic growth either through a better allocation of resources or, indirectly, through the stimulation of investment in physical and human capital.

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  • Gema Fabro & José Aixalá, 2012. "Direct and Indirect Effects of Economic and Political Freedom on Economic Growth," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(4), pages 1059-1080.
    • Handle: RePEc:mes:jeciss:v:46:y:2012:i:4:p:1059-1080
    DOI: 10.2753/JEI0021-3624460411
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    Cited by:

    1. Nikolova, Milena & Popova, Olga, 2023. "Echoes of the Past: The Enduring Impact of Communism on Contemporary Freedom of Speech Values," IZA Discussion Papers 16657, Institute of Labor Economics (IZA).
    2. Mhamed ali Khemakhem & zouheir abida, 2016. "Institutions, Foreign Direct Investment, and Economic Growth in North African Countries," Proceedings of Business and Management Conferences 3405669, International Institute of Social and Economic Sciences.
    3. N. Nuzulman & Raja Masbar & B. S. Nazamuddin & M. Shabri Abd. Majid, 2023. "Does Democracy Matter for Economic Growth? Empirical Evidence from Indonesia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 34-50.
    4. Ryan H. Murphy & Colin O’Reilly, 2019. "Applying panel vector autoregression to institutions, human capital, and output," Empirical Economics, Springer, vol. 57(5), pages 1633-1652, November.
    5. Joshi, Prathibha & Beck, Kris, 2021. "Economic Growth and the Rise of Democracy: A Granger Causality Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(4), pages 389-414.
    6. 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.
    7. Andreeva, Tatiana & Garanina, Tatiana & Sáenz, Josune & Aramburu, Nekane & Kianto, Aino, 2021. "Does country environment matter in the relationship between intellectual capital and innovation performance?," Journal of Business Research, Elsevier, vol. 136(C), pages 263-273.
    8. Hosein Mohammadi & Samira Shayanmehr & Juan D. Borrero, 2022. "Does Freedom Matter for Sustainable Economic Development? New Evidence from Spatial Econometric Analysis," Mathematics, MDPI, vol. 11(1), pages 1-19, December.
    9. Sadia IMTIAZ & Malik Fahim BASHIR, 2017. "Economic freedom and foreign direct investment in South Asian countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(611), S), pages 277-290, Summer.
    10. Rafael Eduardo Saavedra Leyva & Carlos H. Flores Orona, 2017. "La gobernabilidad como un determinante de la inversión extranjera directa en América Latina. (The Governance as a Determinant of Foreign Direct Investment in Latin America)," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 123-146, October.
    11. Teixeira, Aurora A.C. & Queirós, Anabela S.S., 2016. "Economic growth, human capital and structural change: A dynamic panel data analysis," Research Policy, Elsevier, vol. 45(8), pages 1636-1648.
    12. Kurrild-Klitgaard, Peter, 2023. "Ytringsfriheden og dens nyautoritære fjender [Freedom of speech and its neo-authoritarian enemies]," MPRA Paper 118931, University Library of Munich, Germany.
    13. Petar Stankov, 2017. "Economic Freedom and Welfare Before and After the Crisis," Springer Books, Springer, number 978-3-319-62497-6, December.
    14. Anabela Queirós & Aurora A.C. Teixeira, 2014. "Economic growth, human capital and structural change: an empirical analysis," FEP Working Papers 549, Universidade do Porto, Faculdade de Economia do Porto.

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