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How Do Economic Freedom and Investment Affect Economic Growth?

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  • KIMLONG CHHENG

    (Kobe University, Graduate School of International Cooperation Studies)

Abstract

This paper studies whether and how capital investment and economic freedom jointly endogenize economic growth. The results produced by White’s heteroscedasticity-consistent matrix tests on a panel data of 50 countries over 1981-2000 support the crucial role of both domestic and foreign capital investment and economic freedom for rapid growth. Countries that improve economic freedom and that bolster capital investment tend to experience faster growth. The domestic investment rate _the breakdown of public and private investment_ and foreign direct investment are positively associated with economic growth, while the initial real per capita GDP is negatively correlated with subsequent growth rate.

Suggested Citation

  • Kimlong Chheng, 2005. "How Do Economic Freedom and Investment Affect Economic Growth?," Macroeconomics 0509021, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0509021
    Note: Type of Document - pdf; pages: 10
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0509/0509021.pdf
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    References listed on IDEAS

    as
    1. Jan-Egbert Sturm & Jakob De Haan, 2001. "How robust is the relationship between economic freedom and economic growth?," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 839-844.
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    4. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
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    6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
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    8. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    9. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
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    11. Jac C. Heckelman, 2000. "Economic Freedom and Economic Growth: A Short-run Causal Investigation," Journal of Applied Economics, Universidad del CEMA, vol. 3, pages 71-91, May.
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    13. Minier, Jenny A, 1998. "Democracy and Growth: Alternative Approaches," Journal of Economic Growth, Springer, vol. 3(3), pages 241-266, September.
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    Cited by:

    1. Olena SOKOLOVSKA, 2016. "Trade freedom and revenue from trade taxes: a cross-country analysis," Vestnik of the St. Petersburg University. Series 5. Economics Вестник Санкт-Петербургского университета. Серия 5. Экономика, CyberLeninka;Федеральное государственное бюджетное образовательное учреждение высшего образования «Санкт-Петербургский государственный университет», issue 2, pages 52-67.
    2. repec:ksp:journ2:v:4:y:2017:i:3:p:343-344 is not listed on IDEAS
    3. Jan Hanousek & Evžen Kočenda, 2011. "Public Investment and Fiscal Performance in the New EU Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 43-71, March.
    4. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK.
    5. repec:ksp:journ2:v:4:y:2017:i:3:p:345-351 is not listed on IDEAS

    More about this item

    Keywords

    Economic freedom; investment; growth;

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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