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Regulations and economic growth: some empirical evidence based on the Bayesian model pooling

Author

Listed:
  • Mariusz Próchniak

    (Szkoła Główna Handlowa w Warszawie)

  • Bartosz Witkowski

    (Szkoła Główna Handlowa w Warszawie)

Abstract

The paper aims to assess the impact of regulations (measured by the Heritage Foundation index of economic freedom) on economic growth. The method of the analysis is based on growth regressions where economic freedom is included in the set of explanatory variables, along with some other control factors. The dependent variable is GDP per capita growth rate. In order to be robust to the selection of explanatory variables, the paper uses Bayesian model pooling applied to Blundell and Bond’s GMM system estimator. Another innovative aspects are- the use of ‘moving’ panel data in which subsequent observations cover observations from partly overlapping periods as well as the inclusion of nonlinearities. The results show that the level of and the change in economic freedom both reveal a positive and nonlinear relationship with economic growth. A given increase in economic freedom has a greater impact on economic growth in those countries that are economically not (or partly) free.

Suggested Citation

  • Mariusz Próchniak & Bartosz Witkowski, 2013. "Regulations and economic growth: some empirical evidence based on the Bayesian model pooling," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 30, pages 139-154.
    • Handle: RePEc:sgh:annals:i:30:y:2013:p:139-154
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    References listed on IDEAS

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    1. Andreas Bergh & Martin Karlsson, 2010. "Government size and growth: Accounting for economic freedom and globalization," Public Choice, Springer, vol. 142(1), pages 195-213, January.
    2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    3. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191.
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