Neoliberalism’s relationship with economic growth in the developing world: Was it the power of the market or the resolution of financial crisis?
This article examines the relationship between "economic freedom" and economic growth. Previous studies have found a positive relationship between economic growth rates and "economic freedom", and used this relationship as a basis for arguing that more liberal economic policies promote development. "Economic freedom" conflates laissez-faire policy with other important concepts, like good governance and macroeconomic stability. When laissez-faire is parsed from these other concepts, it shows no positive relationship with growth outside of the early-1990s, a period in which financially-strained developing governments and financial systems enjoyed debt bailouts in exchange for liberalization reforms. Further analysis shows that laissez-faire exerts no discernible effect on economic growth net of the debt relief, inflation containment and improved inward investment that occurred after the Cold War. I argue that free market capitalism itself may not have promoted economic development in the post-Cold War era. Instead, free market reforms occurred alongside domestic and international political developments that helped developing countries resolve a serious financial crises, and that the resolution of these crises were most important in explaining the comparative prosperity of the 1990s and 2000s.
|Date of creation:||15 Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
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.:
- Guasch, J Luis & Hahn, Robert W, 1999.
"The Costs and Benefits of Regulation: Implications for Developing Countries,"
World Bank Research Observer,
World Bank Group, vol. 14(1), pages 137-58, February.
- Guasch, J. Luis & Hahn, Robert W., 1997. "The costs and benefits of regulation : implications for developing countries," Policy Research Working Paper Series 1773, The World Bank.
- 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, Universität Konstanz.
- 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.
- Robert B. Barsky & Lutz Kilian, 2001.
"Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative,"
NBER Working Papers
8389, National Bureau of Economic Research, Inc.
- Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc.
- Flood, Robert & Marion, Nancy, 1999.
"Perspectives on the Recent Currency Crisis Literature,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 4(1), pages 1-26, January.
- Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc.
- Nancy P. Marion & Robert P. Flood, 1998. "Perspectiveson the Recent Currency Crisis Literature," IMF Working Papers 98/130, International Monetary Fund.
- Rudiger Dornbusch & Sebastian Edwards, 1991.
"The Macroeconomics of Populism in Latin America,"
National Bureau of Economic Research, Inc, number dorn91-1.
- James Honaker & Gary King & Matthew Blackwell, . "Amelia II: A Program for Missing Data," Journal of Statistical Software, American Statistical Association, vol. 45(i07).
- Stern, Charlotta & Klein, Daniel B., 2006. "Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members," Working Paper Series 6/2006, Swedish Institute for Social Research.
- Kolodko, Grzegorz W., 2000. "From Shock to Therapy: The Political Economy of Postsocialist Transformation," OUP Catalogue, Oxford University Press, number 9780198297437.
- Sala-i-Martin, Xavier, 1997.
"I Just Ran Two Million Regressions,"
American Economic Review,
American Economic Association, vol. 87(2), pages 178-83, May.
- Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
- Axel Dreher, 2002.
"The Development and Implementation of IMF and World Bank Conditionality,"
- Dreher, Axel, 2002. "The development and implementation of IMF and World Bank conditionality," HWWA Discussion Papers 165, Hamburg Institute of International Economics (HWWA).
- 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.
- repec:reg:rpubli:120 is not listed on IDEAS
- Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
- Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
- Romain Wacziarg, 2002. "Review of Easterly's The Elusive Quest for Growth," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 907-918, September.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:24399. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.