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The Efficacy of Democracy and Freedom in Fostering Economic Growth

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  • M. Adnan Kabir
  • Najib Alam

Abstract

The relationship between democracy, freedom, and economic development has a multidisciplinary and diverse literature without a settled or concrete answer. Studies that attempt to validate this relationship have a cacophony of diametrically opposed narratives with a degree of dissonance that does not always articulate a complete understanding of the issue. This study attempts to contribute to the existing complex and ever-changing literature by empirically estimating whether democracy, personal and economic freedom affect economic growth. This paper empirically investigates 115 countries over the period 2006–2018 using panel regressions and found that the quality of democracy was significant in explaining the per capita income growth dynamics of a country. Economic freedom also has a statistically significant and positive relationship with per capita income progression. Personal freedom, on the other hand, is detrimental to growth in countries that have low levels of freedom but acts as a catalyst for growth when a society has reached a mature level of personal freedom. Other factors related to development entrapment such as income inequality, unemployment, and urbanization also have a significant impact on economic progression. In line with historical consensus, countries institutionally insulated from democracy fare worse economically than their democratic counterparts.

Suggested Citation

  • M. Adnan Kabir & Najib Alam, 2021. "The Efficacy of Democracy and Freedom in Fostering Economic Growth," Emerging Economy Studies, International Management Institute, vol. 7(1), pages 76-93, May.
    • Handle: RePEc:sae:emecst:v:7:y:2021:i:1:p:76-93
    DOI: 10.1177/23949015211057942
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