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Is “economic freedom” strictly free market capitalism? A decompositional analysis of the Economic Freedom of the World index

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  • Cohen, Joseph N

Abstract

The Frasier Institute’s Economic Freedom of the World is often taken as a metric of market capitalism. This paper argues that the index is an amalgam of measures capturing free markets and good governance, and analysts should remain cognizant of this conceptual conflation when using the index to develop policy prescriptions. Implicitly, the “economic freedom” literature suggests that countries embrace an “Anglo-Swiss” policy model, although the rich world offers alternative models that maximize good governance but not liberalization. Factor analyses suggest that the index’s Legal System & Property Rights component is more closely related to outside governance metrics that do not imply market liberalism than other “economic freedom” constituent measures.

Suggested Citation

  • Cohen, Joseph N, 2009. "Is “economic freedom” strictly free market capitalism? A decompositional analysis of the Economic Freedom of the World index," MPRA Paper 22437, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:22437
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    Cited by:

    1. Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2011. "Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid Between nonDAC and DAC Donor Countries," World Development, Elsevier, vol. 39(11), pages 1950-1968.
    2. Cohen, Joseph N, 2011. "“Economic freedom” and economic growth: questioning the claim that freer markets make societies more prosperous," MPRA Paper 33758, University Library of Munich, Germany.
    3. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24527, University Library of Munich, Germany.
    4. Cohen, Joseph N, 2010. "Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?," MPRA Paper 24399, University Library of Munich, Germany.
    5. Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2010. "Are 'new' donors different? Comparing the allocation of bilateral aid between non-DAC and DAC donor," University of Göttingen Working Papers in Economics 96, University of Goettingen, Department of Economics.

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    More about this item

    Keywords

    Economic Freedom; Capitalism; Governance; Economic Policy; Economic Development;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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