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Contagious Capitalism

Author

Listed:
  • Peter T. Leeson

    (Department of Economics, West Virginia University)

  • Russell S. Sobel

    (Department of Economics, West Virginia University)

Abstract

Is capitalism contagious? Since WWI, global foreign policy has treated economic freedom/repression like a virus that spreads between countries. Most recently, the ?domino theory? of freedom has played prominently in U.S. foreign policy toward Asia, Latin America, and the Caribbean during the Cold War, and the Middle East during the War on Terror. This paper investigates the spread of economic freedom between nations. Our analysis considers two potential channels of this spread: geography and trade. We estimate two models of spatial dependence using panel data that cover more than 100 countries between 1985 and 2000. We ?nd that capitalism is in fact contagious. Countries consistently ?catch?about 20 percent of their average geographic neighbors?and trading partners?levels and changes in economic freedom. We also explore American foreign military intervention?s ability to spread economic freedom abroad. We ?nd that although intervention may increase freedom in U.S. occupied countries, this freedom is not contagious. Using our estimates of freedom?s spread when it is contagious, we simulate the impact of successful Iraqi occupation on Middle Eastern freedom. Even under the most favorable assumptions, we ?nd that U.S. occupation would minimally improve freedom in this region.

Suggested Citation

  • Peter T. Leeson & Russell S. Sobel, 2006. "Contagious Capitalism," Working Papers 06-04 Classification-, Department of Economics, West Virginia University.
  • Handle: RePEc:wvu:wpaper:06-04
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    File URL: http://be.wvu.edu/phd_economics/pdf/06-04.pdf
    File Function: First version, 2006
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    References listed on IDEAS

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    1. Peter J. Boettke & Christopher J. Coyne & Peter T. Leeson, 2015. "Institutional stickiness and the New Development Economics," Chapters,in: Culture and Economic Action, chapter 6, pages 123-146 Edward Elgar Publishing.
    2. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    3. Hayek, F. A., 1996. "Individualism and Economic Order," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226320939, July.
    4. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-662, June.
    5. James D. Gwartney & Robert A. Lawson & Randall G. Holcombe, 1999. "Economic Freedom and the Environment for Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 643-643, December.
    6. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change," Introductory Chapters,in: Understanding the Process of Economic Change Princeton University Press.
    7. Christopher J. Coyne & Peter T. Leeson, 2004. "The Plight of Underdeveloped Countries," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 235-249, Fall.
    8. Tomi Ovaska & Russell S. Sobel, 2005. "Entrepreneurship in Post-Socialist Economies," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 21(Fall 2005), pages 8-28.
    9. Seth W. Norton, 1998. "Poverty, Property Rights, and Human Well-Being: A Cross-National Study," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 233-245, Fall.
    10. Christopher J. Coyne & Peter T. Leeson, 2004. "Read All About It! Understanding the Role of Media in Economic Development," Kyklos, Wiley Blackwell, vol. 57(1), pages 21-44, February.
    11. repec:cto:journl:v:18:y:1998:i:2:p: is not listed on IDEAS
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    Cited by:

    1. Hossein Mirshojaeian Hosseini & Shinji Kaneko, 2012. "Spatial Spillover of Governance and Institutional Quality: A Spatial Econometric Approach," IDEC DP2 Series 2-3, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    2. Hosseini, Hossein Mirshojaeian & Kaneko, Shinji, 2013. "Can environmental quality spread through institutions?," Energy Policy, Elsevier, vol. 56(C), pages 312-321.

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