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Heterogeneity In Economic Freedom: Free Clusters Or Free Countries

Author

Listed:
  • Manuel Vega-Gordillo

    (School of Economics and Business Administration, University of Navarra)

  • José Luis à lvarez-Arce

    (School of Economics and Business Administration, University of Navarra)

Abstract

How heterogeneous are countries with respect to economic freedom? This is an interesting empirical question since, if we can discover different groups of countries according to their economic freedom indicators, we will be able to identify which steps are required to foster convenient institutional changes. To come up with an answer to this question, we apply a hybrid clustering method - HOPACH - to two sets of components of economic freedom. These two datasets, which account for heterogeneity among countries, are built on the same information framework but with different degrees of aggregation. Specifically, we work on both the 38 variables and the five major areas of the Fraser Institute's Economic Freedom of the World Index. In both cases, HOPACH produces a segmentation and an ordered list of countries. Our results suggest that the classification of countries based on an overall economic freedom index may take us to misleading conclusions due to multidimensional sources of heterogeneity and the uncertainty about the number of segments in the distribution of the index.

Suggested Citation

  • Manuel Vega-Gordillo & José Luis à lvarez-Arce, 2005. "Heterogeneity In Economic Freedom: Free Clusters Or Free Countries," Faculty Working Papers 08/05, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp0805
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    File URL: http://www.unav.edu/documents/10174/6546776/1271697557_WP_UNAV_08_05.pdf
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    References listed on IDEAS

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    Cited by:

    1. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, School of Economics, University of Bristol, UK.

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    More about this item

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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