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Effects of Economic Freedom on Growth and the Environment - Implications for Cross-Country Analysis

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  • Lundström, Susanna

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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    Abstract

    The purpose of this paper is to discuss the effects of specific economic freedom categories on both economic growth and the environment, and present some important considerations for cross-country regressions. First, there is a survey of arguments for positive as well as negative effects of economic liberalization. Measurement problems are then considered followed by a number of model specification issues. Sensitivity tests and potential econometric problems are also discussed. The main conclusion is that decomposition is important since different economic freedoms can be expected to have different effects on growth and the environment, and are dependent on different interacting factors. The theoretical insights have a crucial role when it comes to selecting what empirical issues to take into account since there is a limit to the number of issues possible to consider. Due to the complexity of the links, a lot of effort should also be devoted to sensitivity tests.

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    File URL: http://hdl.handle.net/2077/2819
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 115.

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    Length: 35 pages
    Date of creation: 05 Nov 2003
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0115

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    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Keywords: Cross-country regressions; Economic freedom; Economic growth; Environmental quality; Institutions;

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