Influence of the degree of economic freedom on labor productivity in Latin America

Introduction: Latin American countries exhibit considerable heterogeneity in terms of labor productivity levels and the degree of economic freedom. Objective: To analyze the influence of economic freedom on labor productivity in Latin American countries. Methodology: Panel data from 20 countries covering the period 2014 - 2023 were used, applying clustered ordinary least squares, fixed and random effects models. Results: Economic freedom has a positive effect on labor productivity. The countries with the highest levels of productivity are those with the highest degree of economic freedom. Key indicators include property rights, control of corruption, public spending, fiscal health, entrepreneurial freedom and monetary independence. Discussion: A greater degree of economic freedom fosters labor productivity, although the relationship varies between countries. The interaction with other factors such as educational quality and infrastructure also influences the results. Although economic freedom is key, other complementary elements must be considered for a more significant impact. Conclusions: Economic freedom is crucial to increase labor productivity. Economic policies should focus on creating a favorable environment for investment and innovation.