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Institutional Convergence: Exit or Voice?

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  • Joshua C. Hall

    (West Virginia University, Department of Economics)

Abstract

There is a small but growing literature on the determinants of economic freedom. In this paper I contribute to this literature in two ways. First, I empirically show that Beta-convergence in economic freedom occurred from 1980 to 2010. Countries with low levels of economic freedom in 1980 "catch up" at a rate of 0.7 percent a year on average, ceteris paribus. Second, I document the structural characteristics that contribute to this institutional convergence. My conditional convergence estimates suggest democratic institutions do not contribute to conditional convergence. Exitability, a variable that captures how easy it is for citizens to "vote with their feet" is related to the change in economic freedom from 1980 to 2010 in a statistically significant manner across all specifications. This provides some to the importance of "exit" versus "voice" with respect to the question of institutional change.

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  • Joshua C. Hall, 2015. "Institutional Convergence: Exit or Voice?," Working Papers 15-40, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:15-40
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    More about this item

    Keywords

    Convergence; Economic Freedom; Institutional Change; Democracy; Exit;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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