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Lessons from the experience of OECD nations on macroeconomic growth and economic freedom, 2004–2008

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  • Richard Cebula

    ()

  • J. Clark

Abstract

This study empirically investigates the impact on per capita real economic growth of each of the ten measures of economic freedom computed annually by the Heritage Foundation. Within the context of the Random Effects Model, panel least squares estimations using a 5-year panel (2004 through 2008) dataset for the OECD nations as a group reveal that the percentage growth rate in the purchasing-power-parity adjusted per capita real GDP for OECD nations was, at the 5 % statistical significance level or better, an increasing function of at least seven of the ten economic freedom measures. The results underscore the critical role that economic freedom plays in a nation’s economic growth and prosperity and the importance of pursuing policies that are consistent with increasing economic freedom. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s12232-012-0162-0
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Article provided by Springer in its journal International Review of Economics.

Volume (Year): 59 (2012)
Issue (Month): 3 (September)
Pages: 231-243

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Handle: RePEc:spr:inrvec:v:59:y:2012:i:3:p:231-243
Contact details of provider: Web page: http://www.springer.com/economics/journal/12232

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Keywords: Economic freedom; Percentage real per capita GDP growth; Public policy; P10; P16; E60; F43; H61;

Find related papers by JEL classification:

  • P10 - Economic Systems - - Capitalist Systems - - - General
  • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
  • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

References listed on IDEAS
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  1. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
  2. Stephen M. Renas & Richard J. Cebula, 2005. "Enron, Herding, and Deterrent Effects," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(3), pages 743-756, 07.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Julio H. Cole, 2003. "The Contribution of Economic Freedom to World Economic Growth: 1980-99," Cato Journal, Cato Journal, Cato Institute, vol. 23(2), pages 189-198, Fall.
  5. Keith M. Carlson & Roger W. Spencer, 1975. "Crowding out and its critics," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 2-17.
  6. de Haan, Jakob & Siermann, Clemens L J, 1998. " Further Evidence on the Relationship between Economic Freedom and Economic Growth," Public Choice, Springer, vol. 95(3-4), pages 363-80, June.
  7. Cebula, Richard J, 1978. "An Empirical Analysis of the "Crowding Out" Effect of Fiscal Policy in the United States and Canada," Kyklos, Wiley Blackwell, vol. 31(3), pages 424-36.
  8. repec:cto:journl:v:21:y:2002:i:3:p:415-426 is not listed on IDEAS
  9. David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-49, Part I, M.
  10. James D . Gwartney & Randall G . Holcombe & Robert A . Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, vol. 59(2), pages 255-273, 05.
  11. repec:cto:journl:v:18:y:1998:i:2:p: is not listed on IDEAS
  12. Silvio Contessi, 2008. "Net exports' recent (and surprising?) contribution to GDP growth," International Economic Trends, Federal Reserve Bank of St. Louis, issue Nov.
  13. Seth W. Norton, 1998. "Poverty, Property Rights, and Human Well-Being: A Cross-National Study," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 233-245, Fall.
  14. J. R. Clark & Robert A. Lawson, 2008. "The Impact of Economic Growth, Tax Policy and Economic Freedom on Income Inequality," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 24(Fall 2008), pages 23-31.
  15. 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.
  16. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-19, October.
  17. Cebula, Richard J., 1995. "The impact of federal government budget deficits on economic growth in the united states: an empirical investigation, 1955-1992," International Review of Economics & Finance, Elsevier, vol. 4(3), pages 245-252.
  18. Arora, Vivek & Vamvakidis, Athanasios, 2006. "The Impact of U.S. Economic Growth on the Rest of the World: How Much Does It Matter?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 21-39.
  19. Dube, Smile, 2009. "Foreign Direct Investment and Electricity Consumption on Economic Growth: Evidence from South Africa," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 62(2), pages 175-200.
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