Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?
AbstractThis article examines the relationship between "economic freedom" and economic growth. Previous studies have found a positive relationship between economic growth rates and "economic freedom", and used this relationship as a basis for arguing that more liberal economic policies promote development. "Economic freedom" conflates laissez-faire policy with other important concepts, like good governance and macroeconomic stability. When laissez-faire is parsed from these other concepts, it shows no positive relationship with growth outside of the early-1990s, a period in which financially-strained developing governments and financial systems enjoyed debt bailouts in exchange for liberalization reforms. Further analysis shows that laissez-faire exerts no discernible effect on economic growth net of the debt relief, inflation containment and improved inward investment that occurred after the Cold War. I argue that free market capitalism itself may not have promoted economic development in the post-Cold War era. Instead, free market reforms occurred alongside domestic and international political developments that helped developing countries resolve a serious financial crises, and that the resolution of these crises were most important in explaining the comparative prosperity of the 1990s and 2000s.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24527.
Date of creation: 15 Jul 2010
Date of revision:
economic freedom; neoliberalism; laissez faire; periodicity; economic growth; economic development; capitalism;
Find related papers by JEL classification:
- P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform
- P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
- O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-FDG-2011-02-26 (Financial Development & Growth)
- NEP-HPE-2011-02-26 (History & Philosophy of Economics)
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.:
- Xavier Sala-i-Martin, 1997.
"I just ran four million regressions,"
Economics Working Papers
201, Department of Economics and Business, Universitat Pompeu Fabra.
- Dornbusch, Rudiger & Edwards, Sebastian, 1989.
"The macroeconomics of populism in Latin America,"
Policy Research Working Paper Series
316, The World Bank.
- Jakob De Haan & Susanna Lundström & Jan-Egbert Sturm, 2006.
"Market-oriented institutions and policies and economic growth: A critical survey,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 20(2), pages 157-191, 04.
- Jakob de Haan & Susanna Lundstroem & Jan-Egbert Sturm, 2005. "Market oriented institutions and policies and economic growth: A critical survey," TWI Research Paper Series 5, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
- Guasch, J Luis & Hahn, Robert W, 1999.
"The Costs and Benefits of Regulation: Implications for Developing Countries,"
World Bank Research Observer,
World Bank Group, vol. 14(1), pages 137-58, February.
- Guasch, J. Luis & Hahn, Robert W., 1997. "The costs and benefits of regulation : implications for developing countries," Policy Research Working Paper Series 1773, The World Bank.
- Guasch, J. Luis & Hahn, Robert W., 1999. "The Costs and Benefits of Regulation: Implications for Developing Countries," Working paper 120, Regulation2point0.
- James Honaker & Gary King & Matthew Blackwell, . "Amelia II: A Program for Missing Data," Journal of Statistical Software, American Statistical Association, vol. 45(i07).
- Levine, Ross & Renelt, David, 1991.
"A sensitivity analysis of cross-country growth regressions,"
Policy Research Working Paper Series
609, The World Bank.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
- Robert B. Barsky & Lutz Kilian, 2001.
"Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative,"
NBER Working Papers
8389, National Bureau of Economic Research, Inc.
- Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc.
- Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
- Axel Dreher, 2002.
"The Development and Implementation of IMF and World Bank Conditionality,"
- Dreher, Axel, 2002. "The development and implementation of IMF and World Bank conditionality," HWWA Discussion Papers 165, Hamburg Institute of International Economics (HWWA).
- Kolodko, Grzegorz W., 2000. "From Shock to Therapy: The Political Economy of Postsocialist Transformation," OUP Catalogue, Oxford University Press, number 9780198297437.
- Stern, Charlotta & Klein, Daniel B., 2006. "Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members," Working Paper Series 6/2006, Swedish Institute for Social Research.
- Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
- Cohen, Joseph N, 2009. "Is “economic freedom” strictly free market capitalism? A decompositional analysis of the Economic Freedom of the World index," MPRA Paper 22437, University Library of Munich, Germany.
- Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
- Rinat Menyashev & Timur Natkhov & Konstantin Yanovskiy, 2013. "Institutions, ratings and economic growth: in search of reliable indicators," HSE Working papers WP BRP 47/EC/2013, National Research University Higher School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.