and has been updated annually since. During this period, the EFW index has been cited in hundreds of academic articles. Here, we provide an accounting and description of this literature. Of 402 articles citing the EFW index, 198 used the index as an independent variable in an empirical study. Over two-thirds of these studies found economic freedom to correspond to a "good" outcome such as faster growth, better living standards, more happiness, etc. Less than 4% of the sample found economic freedom to be associated with a "bad" outcome such as increased income inequality. The balance of evidence is overwhelming that economic freedom corresponds with a wide variety of positive outcomes with almost no negative tradeoffs. (JEL P0, O43)

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The literature on institutions and economic growth shows a close relationship between the quality of institutions and prosperity. This paper examines the impact of institutions on investment, and the resulting impact of investment on growth. The private investment rate of countries with better institutional quality is higher, and the productivity of any given level of investment is greater in countries with better institutions. Models that include various indicators of institutional quality along with inputs such as physical and human capital will generally underestimate the impact of institutional quality on growth because they do not account for the indirect impact of institutions on investment, as is done here. The paper also examines the direction of causality to show that higher institutional quality causes more investment, rather than the other way around. Further, future institutional improvements are more likely to occur against a background of poor economic performance than one of sustained growth. Copyright 2006 Blackwell Publishing Ltd..

The Economic Freedom of the World Annual Report measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property. Forty-two data points are used to construct a summary index, along with a Gender Legal Rights Adjustment to measure the extent to which women have the same level of economic freedom as men. The degree of economic freedom is measured in five broad areas: Size of Government, Legal System and Property Rights, Sound Money, Freedom to Trade Internationally, and Regulation.

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