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Economic Freedom and Development: Productive, Unproductive, and Destructive

In: Destructive Entrepreneurship in Emerging Markets

Author

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  • Christopher J. Boudreaux

    (Florida Atlantic University)

Abstract

Why are some countries more prosperous than others? This question dates back to Adam Smith’s (1776) Wealth of Nations, and the consensus is that institutions such as economic freedom matter for economic development. Depending on the quality, economic freedom can either encourage or discourage economic development. In this chapter, I provide a ranking of 118 countries according to productive (i.e., STEM) and unproductive activities (business, administration, and law) in education. First, I find that these measures are negatively correlated—countries that have more graduates in STEM tend to also have less graduates in business, administration, and law. Second, I compute a net ranking according to these two metrics (i.e., net productivity). My analysis reveals that economic freedom encourages greater net productivity for OECD countries only. For non-OECD countries, more economic freedom is associated with lower net productivity. This result is driven by higher rates of graduates in business, administration, and law and not STEM graduates. Thus, economic freedom is associated with more development and net productivity, but these results are weaker for non-OECD countries.

Suggested Citation

  • Christopher J. Boudreaux, 2025. "Economic Freedom and Development: Productive, Unproductive, and Destructive," Springer Books, in: Amir Emami & Esin Yoruk & Andrew Johnston & Andrea Caputo & Paul Jones (ed.), Destructive Entrepreneurship in Emerging Markets, chapter 0, pages 13-29, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-0112-7_2
    DOI: 10.1007/978-981-96-0112-7_2
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