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A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods

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  • Callais, Justin T.
  • Young, Andrew T.

Abstract

The cross-country relationship between economic freedom and inequality is explored using matching methods. This approach addresses selection bias and endogeneity generally better than extant studies. Meaningful increases in the Fraser Institute's Economic Freedom of the World (EFW) index are related to changes in (i) decile income shares, (ii) decile income levels, and (iii) Gini coefficients. Increased economic freedom is associated with significant gains across the income distribution. It is also associated with modest increases in inequality – associated particularly with gains in the top income decile.

Suggested Citation

  • Callais, Justin T. & Young, Andrew T., 2023. "A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 744-777.
    • Handle: RePEc:eee:jcecon:v:51:y:2023:i:3:p:744-777
    DOI: 10.1016/j.jce.2023.03.001
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    More about this item

    Keywords

    Economic freedom; Income deciles; Inequality; Matching methods; Causal inference; Institutional economics;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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