“Economic freedom” and economic growth: questioning the claim that freer markets make societies more prosperous
AbstractA conventional reading of economic history implies that free market reforms rescued the world’s economies from stagnancy during the 1970s and 1980s. I reexamine a well-established econometric literature linking economic freedom to growth, and argue that their positive findings hinge on two problems: conceptual conflation and ahistoricity. When these criticisms are taken seriously, a very different view of the historical record emerges. There does not appear to be enduring relationship between economic liberalism and growth. Much of the observed relationship between these two variables involves a one-shot transition to freer markets around the Cold War’s end. Several concurrent changes took place in this historical context, and it is hasty to conclude that it was market liberalization alone that produced the economic turnaround of the 1990s and early-2000s. I also question market fundamentalists’ view that all forms of liberalization are helpful, arguing that the data show little to no benefit from reforms that did not attract foreign investment.
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 33758.
Date of creation: 27 Sep 2011
Date of revision:
Economic Growth; Economic Freedom; Economic Liberalization; Economic Development; Foreign Investment; Market Fundamentalism; Inflation; Governance;
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
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.:
- Hubert Janicki & Phanindra Wunnava, 2004. "Determinants of foreign direct investment: empirical evidence from EU accession candidates," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(5), pages 505-509.
- Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, Elsevier, vol. 29(9), pages 1593-1610, September.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
- Flood, Robert & Marion, Nancy, 1999.
"Perspectives on the Recent Currency Crisis Literature,"
International Journal of Finance & Economics, John Wiley & Sons, Ltd.,
John Wiley & Sons, Ltd., vol. 4(1), pages 1-26, January.
- Nancy P. Marion & Robert P. Flood, 1998. "Perspectiveson the Recent Currency Crisis Literature," IMF Working Papers 98/130, International Monetary Fund.
- Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc.
- Barro, Robert J & Sala-i-Martin, Xavier, 1992.
"Public Finance in Models of Economic Growth,"
Review of Economic Studies, Wiley Blackwell,
Wiley Blackwell, vol. 59(4), pages 645-61, October.
- Robert J. Barro & Xavier Sala-i-Martin, 1990. "Public Finance in Models of Economic Growth," NBER Working Papers 3362, National Bureau of Economic Research, Inc.
- Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 630, C.E.P.R. Discussion Papers.
- Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers, Yale - Economic Growth Center 640, Yale - Economic Growth Center.
- William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262550423, December.
- Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics, Department of Economics, Williams College 156, Department of Economics, Williams College.
- 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,
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, Thurgauer Wirtschaftsinstitut, UniversitÃ¤t Konstanz 5, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
- Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers, The Ratio Institute 4, The Ratio Institute.
- Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 36(2), pages 903-936, June.
- David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, StataCorp LP, vol. 3(2), pages 168-177, June.
- Kolodko, Grzegorz W., 2000. "From Shock to Therapy: The Political Economy of Postsocialist Transformation," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198297437, October.
- Rafael E. De Hoyos & Vasilis Sarafidis, 2006. "Testing for cross-sectional dependence in panel-data models," Stata Journal, StataCorp LP, StataCorp LP, vol. 6(4), pages 482-496, December.
- Cohen, Joseph N. & Centeno, Miguel A., 2006. "Neoliberalism and patterns of economic performance: 1980 to 2000," MPRA Paper 22436, University Library of Munich, Germany.
- Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, StataCorp LP, vol. 7(3), pages 281-312, September.
- John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
- 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, Swedish Institute for Social Research 6/2006, Swedish Institute for Social Research.
- Robert J. Barro, 2007. "Milton Friedman: Perspectives, Particularly on Monetary Policy," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 27(2), pages 127-134, Spring/Su.
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.