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Freedom from unit roots? The time series properties of democracy and economic freedom

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  • O'Reilly, Colin
  • Murphy, Ryan H.

Abstract

This paper revisits Sobel and Coyne (2011), which finds a cointegrating relationship between democracy and economic freedom. We extend their sample with data published since that time, make use of the second generation of panel unit root and panel cointegration tests, and apply the more comprehensive measure of democracy from Varieties of Democracy. With these methodological improvements in place, we do not find that either economic freedom or democracy has a unit root in the full set of countries studied, and they therefore cannot have a cointegrating relationship. We then apply the methodology developed by Chortareas and Kapetanios (2009) in order to isolate a subset of countries whose institutions may in fact have a cointegrating relationship.

Suggested Citation

  • O'Reilly, Colin & Murphy, Ryan H., 2025. "Freedom from unit roots? The time series properties of democracy and economic freedom," Journal of Comparative Economics, Elsevier, vol. 53(2), pages 472-489.
    • Handle: RePEc:eee:jcecon:v:53:y:2025:i:2:p:472-489
    DOI: 10.1016/j.jce.2025.02.003
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    Keywords

    Economic freedom; Democracy; State Capacity; Cointegration;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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