This paper outlines the alternative channels through which institutions affect growth and studies the empirical relationship between institutions, investment, and growth. The empirical results indicate that (1) free-market institutions have a positive effect on growth; (2) economic freedom affects growth through both a direct effect on total factor productivity and an indirect effect on investment; (3) political and civil liberties may stimulate investment; (4) an important interaction exists between freedom and human capital investment; (5) Milton Friedman's conjectures on the relation between political and economic freedom are correct; and (6) promoting economic freedom is an effective policy toward facilitating growth and other types of freedom. Copyright 1998 by Oxford University Press.
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Article provided by Oxford University Press in its journal Economic Inquiry.
Volume (Year): 36 (1998) Issue (Month): 4 (October) Pages: 603-19 Download reference. The following formats are available: HTML
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Handle: RePEc:oup:ecinqu:v:36:y:1998:i:4:p:603-19
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