Does constitutional entrenchment matter for economic freedom?

Abstract

A growing number of studies explore the determinants of economic freedom. Very few of them consider constitutional design. We study entrenchment, that is, the extent to which constitutions are more costly to change than ordinary policies and institutions. We utilize 1970–2017 data and study episodes where countries adopted meaningfully more entrenched constitutions. Using matching methods, we construct plausible counterfactuals against which to compare their post‐treatment changes in economic freedom. We report no significant effects on overall freedom. There is some evidence that entrenchment leads to smaller government size, more regulation, and weaker property rights. However, none of these results are robust.

The constitution of ambiguity: The effects of constitutions on economic freedom

“…In the remainder of our literature review we do not consider federalism, and similarly we do not closely explore the literature on legal origins. 4 A recent finding which is congruent with the findings of the present article is by Callais and Young (2021), which uses matching methods among countries that have adopted highly entrenched constitutions to explore the effects of constitutions on economic freedom. While they observe some effects for certain aspects of economic freedom, the authors conclude that little, if anything, is robust.…”

“…Besides La and Callais and Young (2021), three 5 articles explicitly consider the effects of constitutions on overall economic freedom. Mudambi et al (2002), characterising the issue in terms of constitutions constraining rent-seeking behaviour, find positive effects of plurality (first-past-the-post) representation and negative effects of the number of electoral districts.…”

Underperforming reformers: Examining disappointing cases of economic reforms

“…However, this 5 Constitutional characteristics seem to have little effect on economic freedom as well. Callais and Young (2021) show that cases of large changes in constitutional entrenchment are not associated with substantial changes in economic freedom; however, there is some evidence that entrenchment leads to smaller government size, but more stringent regulation and weaker property rights. Murphy (2022) finds some correlative evidence of the aforementioned De Vanssay et al (2005) article, but more sophisticated empirical strategies suggest that these findings are likely no more than correlative.…”

Does economic freedom lighten the blow? Evidence from the great recession in the United States

“… 8 Similar methods have been used in the literature to analyze the causal impact of sustained “reform” across a number of dimensions including country level jumps in economic freedom (Grier and Grier 2021 ), country level improvements in corruption control (Bologna Pavlik et al 2021 ), constitutional entrenchment (Callais and Young 2021a , b ), changes in a country’s rule of law and/or property rights systems (Grier et al 2021 ), and jumps in foreign aid levels (Bologna Pavlik and Young 2021 ). …”