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Proxies in the New Political Economy: Caveat Emptor

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  • John R. Hanson

Abstract

Some common professional criteria for evaluating econometric tests that use proxies for political, social, and institutional variables as regressors may lull scholars into a false sense of security about specious results. The highly publicized correlations between income and economic freedom based on the economic freedom indexes supplied by the Fraser Institute, Heritage Foundation, and Freedom House are used as illustrations. Because these correlations bear strong resemblances to one another, most economists would consider them mutually supportive. Yet this is not so, implying that mutual resemblance and consistency are not criteria for judging econometric results. (JEL B49, C19) Copyright 2003, Oxford University Press.

Suggested Citation

  • John R. Hanson, 2003. "Proxies in the New Political Economy: Caveat Emptor," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 639-646, October.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:4:p:639-646
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    File URL: http://hdl.handle.net/10.1093/ei/cbg033
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    Cited by:

    1. Nathan J. Ashby, 2007. "Economic Freedom and Migration Flows between U.S. States," Southern Economic Journal, John Wiley & Sons, vol. 73(3), pages 677-697, January.
    2. Thomas A. Garrett & Russell M. Rhine, 2011. "Economic freedom and employment growth in U.S. states," Review, Federal Reserve Bank of St. Louis, vol. 93(Jan), pages 1-18.
    3. Nguyen, Canh Phuc & Nguyen, Binh Quang, 2023. "Environmental foe or friend: The influence of the shadow economy on forest land," Land Use Policy, Elsevier, vol. 124(C).
    4. Jac C. Heckelman & Stephen Knack, 2008. "Foreign Aid and Market‐Liberalizing Reform," Economica, London School of Economics and Political Science, vol. 75(299), pages 524-548, August.
    5. Zane Spindler & Xavier Vanssay & Vincent Hildebrand, 2008. "Using Economic Freedom Indexes as Policy Indicators: An Intercontinental Example," Public Organization Review, Springer, vol. 8(3), pages 195-214, September.
    6. Nathan J. Ashby, 2007. "Economic Freedom and Migration Flows between U.S. States," Southern Economic Journal, Southern Economic Association, vol. 73(3), pages 677-697, January.
    7. Colin O’Reilly & Ryan H. Murphy, 2017. "Exogenous Resource Shocks and Economic Freedom," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 243-260, September.
    8. Kilby, Christopher, 2005. "Aid and regulation," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 325-345, May.
    9. Jakob De Haan & Susanna Lundström & Jan‐Egbert Sturm, 2006. "Market‐oriented institutions and policies and economic growth: A critical survey," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 157-191, April.
    10. Kilby, Christopher, 2005. "World Bank lending and regulation," Economic Systems, Elsevier, vol. 29(4), pages 384-407, December.
    11. Belasen, Ariel R. & Hafer, R.W., 2013. "Do Changes in Economic Freedom affect Well-Being?," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
    12. Choi, Ginny Seung & Storr, Virgil Henry, 2023. "The morality of markets in theory and empirics," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 590-607.
    13. Doucouliagos, Chris & Ulubasoglu, Mehmet Ali, 2006. "Economic freedom and economic growth: Does specification make a difference?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 60-81, March.
    14. James D. Gwartney & Randall G. Holcombe & Robert A. Lawson, 2004. "Economic Freedom, Institutional Quality,and Cross-Country Differences in Income and Growth," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 205-233, Fall.
    15. Nathan J. Ashby, 2007. "Economic Freedom and Migration Flows between U.S. States," Southern Economic Journal, John Wiley & Sons, vol. 73(3), pages 677-697, January.
    16. Vishal Jaunky, 2013. "Democracy and economic growth in Sub-Saharan Africa: a panel data approach," Empirical Economics, Springer, vol. 45(2), pages 987-1008, October.
    17. Nir Kshetri & Ralf Bebenroth, 2011. "Sources of Global Heterogeneity in Retail Spending," Discussion Paper Series DP2011-03, Research Institute for Economics & Business Administration, Kobe University.
    18. Jac C. Heckelman, 2005. "Proxies for Economic Freedom: A Critique of the Hanson Critique," Southern Economic Journal, John Wiley & Sons, vol. 72(2), pages 492-501, October.
    19. Farhadi, Minoo & Islam, Md. Rabiul & Moslehi, Solmaz, 2015. "Economic Freedom and Productivity Growth in Resource-rich Economies," World Development, Elsevier, vol. 72(C), pages 109-126.

    More about this item

    JEL classification:

    • B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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