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Does Economic Freedom Foster Tolerance?

Tolerance has the potential to affect both economic growth and wellbeing. It is therefore important to discern its determinants. We add to the literature by investigating whether the degree to which economic institutions and policies are market-oriented is related to different measures of tolerance. Regression analysis of up to 65 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affected by how free markets are. Stable monetary policy and outcomes is the area of economic freedom most consistently associated with greater tolerance, but the quality of the legal system seems to matter as well. We furthermore find indications of a causal relationship and of social trust playing a role as a mechanism in the relationship between economic freedom and tolerance and as an important catalyst: the more trust in society, the more positive the effect of economic freedom on tolerance.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 918.

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Length: 53 pages
Date of creation: 20 Apr 2012
Date of revision:
Publication status: Published as Berggren, Niclas and Therese Nilsson, 'Does Economic Freedom Foster Tolerance?' in Kyklos, 2013, pages 177-207.
Handle: RePEc:hhs:iuiwop:0918
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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