Freedom, Ratings and Economic Growth: In Search of Reliable Dependencies

Ratings evaluating the quality of institutions are widely known; they are generally used in academic and research literature. Among such ratings are some whose compilation procedure took decades to perfect. Dozens of assessments have been accumulated, pertaining to a large and growing list of countries. All these ratings use expert evaluations with country ranking. We suppose that such evaluations are essentially incompatible with each other, and therefore inapplicable in a comparative study at some one specific point in time chosen for observation (i.e., for a cross-section analysis). We propose a group of variables of our own, using evaluations of “political” institutions only to ascertain the presence or absence of a certain phenomenon (yes/no). Such a set of variables makes a cross-section analysis feasible. The countries' experience in Rule of Law Democracy and Limited Government (both are quite clearly defined in a formal manner) provides a long-term institutional development aggregate evaluation for cross-section analysis. We also propose a thoroughly simple rating based on combining the proposed variables with indices and indicators which have already become widely accepted, but taking this combination as part of a data panel. At the same time, using a panel regression makes it possible to mitigate the problem of poor compatibility of expert evaluations.