IDEAS home Printed from https://ideas.repec.org/p/hhs/gunwpe/0033.html
   My bibliography  Save this paper

Economic Freedom and Growth:Decomposing the Effects

Author

Listed:
  • Carlsson, Fredrik

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Lundström, Susanna

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Most studies of the relation between economic freedom and growth of GDP have found a positive relation. One problem in this area is the choice of economic freedom measure. A single measure does notreflect the complex economic environment and a highly aggregated index makes it difficult to draw policy conclusions. In this paper we investigate what specific types of economic freedom measures that are important for growth. The robustness of the results is carefully analysed since the potential problem with multicollinearity is one of the negative effects of decomposing an index. The results show that economic freedom does matter for growth. This does not mean that increasing economic freedom, definedin general terms, is good for economic growth since some of the categories in the index are insignificant and some of the significant variables have negative effects.

Suggested Citation

  • Carlsson, Fredrik & Lundström, Susanna, 2001. "Economic Freedom and Growth:Decomposing the Effects," Working Papers in Economics 33, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0033
    as

    Download full text from publisher

    File URL: http://swopec.hhs.se/gunwpe/papers/gunwpe0033.pdf
    File Function: Complete Rendering
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barro, Robert J, 1996. "Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
    2. de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    4. James D. Gwartney & Robert A. Lawson & Randall G. Holcombe, 1999. "Economic Freedom and the Environment for Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 643-643, December.
    5. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    6. Arthur Goldsmith, 1995. "Democracy, property rights and economic growth," Journal of Development Studies, Taylor & Francis Journals, vol. 32(2), pages 157-174.
    7. De Vanssay, Xavier & Spindler, Z A, 1994. "Freedom and Growth: Do Constitutions Matter?," Public Choice, Springer, vol. 78(3-4), pages 359-372, March.
    8. Nelson, Michael A & Singh, Ram D, 1998. "Democracy, Economic Freedom, Fiscal Policy, and Growth in LDCs: A Fresh Look," Economic Development and Cultural Change, University of Chicago Press, vol. 46(4), pages 677-696, July.
    9. repec:bla:kyklos:v:47:y:1994:i:2:p:231-47 is not listed on IDEAS
    10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    11. Johan Torstensson, 1994. "Property Rights and Economic Growth: An Empirical Study," Kyklos, Wiley Blackwell, vol. 47(2), pages 231-247, May.
    12. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    13. Robert J. Barro, 1994. "Democracy & Growth," NBER Working Papers 4909, National Bureau of Economic Research, Inc.
    14. Scully, Gerald W & Slottje, Daniel J, 1991. "Ranking Economic Liberty across Countries," Public Choice, Springer, vol. 69(2), pages 121-152, February.
    15. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    16. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross‐Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    17. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
    18. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    19. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
    2. repec:dgr:rugccs:199903 is not listed on IDEAS
    3. 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.
    4. Dawid Piątek & Katarzyna Sarzec, 2009. "Państwo a dobrobyt ekonomiczny - między wolnością a przymusem," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 1-19.
    5. Andreas Bergh & Magnus Henrekson, 2011. "Government Size And Growth: A Survey And Interpretation Of The Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 872-897, December.
    6. de Haan, Jakob, 2003. "Economic freedom: editor's introduction," European Journal of Political Economy, Elsevier, vol. 19(3), pages 395-403, September.
    7. Yasir Khan & Attiya Yasmin Javid, 2015. "The Impact of Formal and Informal Institutions on Economic Performance: A Cross-Country Analysis," PIDE-Working Papers 2015:130, Pakistan Institute of Development Economics.
    8. 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.
    9. Jesús Crespo Cuaresma & Gerhard Reitschuler, 2006. "‘Guns Or Butter?’ Revisited: Robustness And Nonlinearity Issues In The Defense–Growth Nexus," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(4), pages 523-541, September.
    10. Hossein Panahi & Ahmad Assadzadeh & Ramiar Refaei, 2014. "Economic Freedom and Economic Growth in Mena Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(1), pages 105-116, January.
    11. R Burger & S du Plessis, 2011. "Examining the Robustness of Competing Explanations of Slow Growth in African Countries," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 35(3), pages 21-47, December.
    12. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    13. Mallick, Debdulal, 2012. "The role of the elasticity of substitution in economic growth: A cross-country investigation," Labour Economics, Elsevier, vol. 19(5), pages 682-694.
    14. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.
    15. Aslý YENÝPAZARLI, 2017. "Economic freedom and effects on economic growth: A time series analysis for Turkey," Turkish Economic Review, KSP Journals, vol. 4(3), pages 345-351, September.
    16. Wang, Lanfang & Wang, Susheng, 2012. "Economic freedom and cross-border venture capital performance," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 26-50.
    17. Fabrizio Carmignani, 2001. "Theory and Evidence on the Political Economy of Growth," Working Papers 33, University of Milano-Bicocca, Department of Economics, revised Jan 2001.
    18. Hatice KÜÇÜKKAYA, 2017. "EUREFE’17 International Conference," Turkish Economic Review, KSP Journals, vol. 4(3), pages 343-344, September.
    19. Chortareas, Georgios E. & Girardone, Claudia & Ventouri, Alexia, 2013. "Financial freedom and bank efficiency: Evidence from the European Union," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1223-1231.
    20. Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
    21. Rok Spruk & Mitja Kovac, 2018. "Inefficient Growth," Review of Economics and Institutions, Università di Perugia, vol. 9(2).

    More about this item

    Keywords

    Economic growth; Economic freedom;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0033. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica Oscarsson (email available below). General contact details of provider: https://edirc.repec.org/data/naiguse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.