Handling Economic Freedom in Growth Regressions: A Reply to Cole and Lawson
COLE AND LAWSON (2007) STATE THAT â€œEQUATION (1) IS Lawsonâ€™s preferred specification, while de Haan et al. favor Equation (4).â€ That is not an appropriate summary of our position, however. We do not have a preference for Equation (4). In our papers on the relationship between economic freedom and economic performance we have always estimated Equations (3) and (4), using the Extreme Bounds Analysis to test whether (the level or the change in) the Fraser index is robustly related to economic growth. Our results are that the level of economic freedom is not robustly related to growth, in contrast to the change of the economic freedom. In our reply (De Haan and Sturm 2006) to Lawson (2006), we explain that the main reason that we do not consider Equation (1) a proper specification is that Equation (1) is equivalent to Equation (2). All sides in the debate seem to agree that Equation (2) is definitely not a good model as there is a serious problem of endogeneity of one of the right-hand side variables (i.e. EF1).
Volume (Year): 4 (2007)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: Enterprise Hall, Room 354, 4400 University Drive, 3G4 Fairfax, VA 22030|
Phone: (703) 993-1151
Web page: https://econjwatch.org/
More information through EDIRC
References listed on IDEAS
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.:
- 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, Universitï¿½t Konstanz.
- de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
- Haan, Jakob de & Sturm, Jan-Egbert, 1999. "On the relationship between economic freedom and economic growth," CCSO Working Papers 199903, University of Groningen, CCSO Centre for Economic Research.
- Julio H. Cole & Robert A. Lawson, 2007. "Handling Economic Freedom in Growth Regressions: Suggestions for Clarification," Econ Journal Watch, Econ Journal Watch, vol. 4(1), pages 71-78, January.
- de Haan, Jakob & Sturm, Jan-Egbert, 2003. "Does more democracy lead to greater economic freedom? New evidence for developing countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 547-563, September.
- Jakob De Haan & Jan-Egbert Sturm, 2006. "How to Handle Economic Freedom: Reply to Lawson," Econ Journal Watch, Econ Journal Watch, vol. 3(3), pages 407-411, September. Full references (including those not matched with items on IDEAS)