The lack of efficiency that characterized the economic policies of developing countries has prompted several economists to recommend a massive disengagement of the state of economic activity. Economic freedom is advanced as an alternative to development strategies more effective. Our work shows that the index of economic freedom hides the importance of its components and mask the importance of state intervention in developing countries. Through the method of Hansen, 2000, we show that for sizes of the State relating to scores above 5,956 (depending on the construction of the index of economic freedom), public investment should have a positive effect on growth.
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number
2008-19.
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Find related papers by JEL classification: C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models H10 - Public Economics - - Structure and Scope of Government - - - General H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
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