The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970–1999

Justesen, Mogens Kamp

doi:10.1016/j.ejpoleco.2008.06.003

Cited by 191 publications

(108 citation statements)

References 46 publications

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“…They found out greater economic freedom fosters economic growth; however the level of economic freedom is not related to growth. The similar conclusion is by [22] economic freedom (or some aspects) causes economic growth. Reference [23] argues that economic freedom, knowledge economy and global competitiveness are three of the many and very different dimensions which characterize the level of a country's performance.…”

Section: B Economic Freedomsupporting

confidence: 51%

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The Effect of Economic Freedom on National Competitiveness: Causality from a Panel of Countries

Tomáš¹

2015

JOEBM

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Abstract-The paper deals with economic freedom and its effect on national competitiveness. There are two goals examined within the paper. At first, I examine if economic freedom causes national competitiveness by means of the Granger causality test. Secondly, the effect of economic freedom on national competitiveness is tested using panel data for the period 2004-2011. Three groups of countries were selected: economic free, Visegrad four and repressed countries. Economic freedom and national competitiveness are quantified by comprehensive indicators: Index of economic freedom and Global competitiveness index. The results suggest that economic freedom causes national competitiveness in countries with higher degree of economic freedom. Positive effect on national competitiveness was found out.

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Section: B Economic Freedomsupporting

confidence: 51%

“…The Granger causality test is carried out to verify the causality between economic freedom and national competitiveness [36]. Reference [22] was followed. The key point of the Granger causality is that the future cannot cause the present or the past.…”

Section: B Methodologymentioning

confidence: 99%

The Effect of Economic Freedom on National Competitiveness: Causality from a Panel of Countries

Tomáš¹

2015

JOEBM

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“…Countries that have higher economic freedom tend to have higher rates of growth (Easton and Walker 1997;De Haan and Sturm 2000;Scully 2002;Cole 2003;Berggren 2003;Gordillo and Alvarez 2003;Carlsson and Lundstrom 2002;Dawson 2003;Justesen 2008;Azman-Saini et al 2010) and are more prosperous with respect to well-being as measured by GDP per capita (Hanke and Walters 1997;Farr et al 1998) than those that have less economic freedom. Economic freedom also has a positive effect on many other aspects of human well-being like lower unemployment (Gwartney et al 1997;Grubel 1998), higher life expectancy (Esposto and Zaleski 1999), more equal income distribution (Berggren 2003;Scully 2002), lower poverty (Connors and Gwartney 2010), better quality of healthcare and education (Stroup 2007) and better ecological consequences (Norton 1998).…”

Section: A Note On Economic Freedommentioning

confidence: 99%

Institutional Origins of Subjective Well-Being: Estimating the Effects of Economic Freedom on National Happiness

Spruk

Kešeljević

2015

J Happiness Stud

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We exploit the cross-country differences in economic freedom to examine the link between the quality of institutions and subjective well-being. Using Veenhoven's happiness dataset, the evidence suggests countries with better economic institutions and higher level of economic freedom, captured by the security of property rights, open markets and more limited government, are significantly more likely to experience greater subjective well-being after controlling for structural confounders of national subjective well-being such as income, unemployment, inequality, social capital and life satisfaction. The effect of institutions on cross-national happiness is both significant and robust to different model specifications, estimation techniques and possible sources of endogeneity. Furthermore, our panel data analysis reveals that over time higher levels of economic freedom are associated with decreasing subjective well-being after controlling for state dependence and income.

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“…At the same time, however, there may also be an effect of economic development on economic freedom. For instance, Justesen (2008) argues that poor economies may have stronger incentives to pursue more market-friendly economic policies to unleash the growth potential associated with them.…”

Section: Additional Control Variablesmentioning

confidence: 99%

“…A large body of empirical research suggests that economic freedom is conducive to economic growth (e.g., Islam, 1996;Wu and Davis, 1998;Gwartney et al, 1999;De Haan and Sturm, 2000;Carlsson and Lundström, 2002;Scully, 2002;De Haan et al, 2006;Justesen, 2008;Williamson and Mathers, 2011). For instance, Gwartney et al (1999) argue that more market-friendly institutions (characterized by, inter alia, more secure property rights, greater freedom of economic exchange and less regulation) promote economic activity by facilitating innovation and entrepreneurship.…”

Section: Introductionmentioning

confidence: 99%

Political capitalism: The interaction between income inequality, economic freedom and democracy

Krieger

Meierrieks

2016

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn this contribution we study the relationship between income inequality and economic freedom for a panel of 100 countries for the 1971-2010 period. From a panel causality study we find that income inequality has a negative causal effect on economic freedom, while causation does not run in the opposite direction. We argue that the negative effect of inequality on economic liberty is due to the elite's political power stemming from its disproportionate control over a country's economic resources. The elite uses this power to curtail economic freedom to defend its economic interests by discouraging innovation, competition and protecting its rents. Running a series of dynamic panel estimations, we show that the negative effect of income inequality on economic freedom is robust to different sets of controls and estimation techniques. Finally, we show that the dynamics of the inequality-freedom nexus are to some extent conditional upon a country's political regime. When inequality is low, democracies enjoy comparatively higher levels of economic liberty, in line with the interests of a large middle-class. By contrast, economic freedom is lower in democracies (compared to strongly autocratic regimes with the same income distribution) when inequality is high. We argue that the latter finding corresponds to a system of political capitalism or captured democracy, where a powerful economic elite cooperates with politicians and bureaucrats for their mutual benefit.JEL Classification: D31, D72

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The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970–1999

Cited by 191 publications

References 46 publications

The Effect of Economic Freedom on National Competitiveness: Causality from a Panel of Countries

The Effect of Economic Freedom on National Competitiveness: Causality from a Panel of Countries

Institutional Origins of Subjective Well-Being: Estimating the Effects of Economic Freedom on National Happiness

Political capitalism: The interaction between income inequality, economic freedom and democracy

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