Does Economic Freedom Bolster Economic Performance?

Managing Global Transitions

The economic growth and economic freedom nexus is studied in this article and applied to South Africa in an empirical study. Economic freedom is founded on the free or private market economy, based on competition, where voluntary exchange occurs and a legislative framework ensures the safety of market agents and private property. As part of the literature study, the Index of Economic Freedom, the Economic Freedom of the World Index and the Freedom in the World Index were studied and applied to South Africa. An empirical analysis was conducted, cross-correlation functions were estimated, and Granger causality functions, regression analysis and finally a vector auto-regression model (var) were constructed and estimated. The research findings from South Africa support the literature, suggesting that there are indeed some indications that greater levels of economic freedom support higher rates of economic growth in a country.

Most studies of the relationship between economic freedom and growth of GDP have found a positive correlation. One problem in this area is the choice of measure of economic freedom. A single measurement does not reflect the complex economic environment and a highly aggregated index makes it difficult to draw policy conclusions. This paper attempts to answer the question: How does economic freedom impact economic growth? Using data from 13 selected MENA countries over the period of 2000 to 2009, this paper investigates the relationship between economic freedom and economic growth. The results of panel data analysis show that economic institutions, specifically economic freedom, play a significant role in economic development independently and the overall index of economic freedom is positively correlated with growth. It is found that economic freedom does matter for growth. This does not mean that increasing economic freedom, defined in 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

It is frequently asserted that high levels of economic growth are supported by economic freedom. For the period 1995-2021, this study examines the influence of the composed economic freedom index and several subcomponents of economic freedom on the economic growth of four South Asian economies, namely Bangladesh, India, Pakistan, and Sri Lanka. The Ordinary Least Squares, Random Effect Model, and Robust Least Squares approaches are utilized to estimate the composed and decomposed influence of economic freedom on economic growth. Robust Least Squares reflects the robustness of the connection between economic liberty and growth. According to the results of these tests, economic liberty has a strong and favorable stimulus on growth. When the different indicators of economic liberty are evaluated independently, we discovered that the magnitudes of most economic freedom indicators are significant. Conversely, monetary freedom contributes very little to economic expansion. The effects of government spending, public trust, and labor flexibility on economic expansion are hypothetical. The tax load hinders economic expansion in the economies under consideration. Property rights, freedom to do business, trade liberty, investment choice, and financial liberty all have a positive, strong, and sizeable stimulus on economic growth. The decomposed influence of each indicator of economic freedom will help develop policy choices.

المجلة العلمية للبحوث التجارية, 2023

That study aims to examine the impact of economic freedom index, ODA and economic development on economic growth in SAARC countries. Moreover it will investigate the short run and long run impacts on GDP per capita in these countries. Therefore it will depend on data for five countries out of 8 countries in SAARC due to a lack of data for some countries from 2005 to 2019. The independent variable is GDP per capita, while the dependent variables are economic freedom index, HDI, ODA, and FDI. The methodology adopted will begin by unit root test then FMOLS model will be adopted. This study ends with a positive effect of HDI and economic freedom index on economic growth but negative effects of FDI and ODA on economic growth. The methodology adopted will begin by unit root test then FMOLS model will be adopted.

Spanish Economic Review, 2009

Several empirical studies have established the relationship between economic freedom, civil liberties and political rights, and economic growth. Nevertheless, few studies analyze the directions of causality. This paper studies the causality relations between the institutional dimensions mentioned above and economic growth, as well as the interrelations between them, using the Granger methodology with panel data for 187 countries and five-yearly observations for the period 1976-2000. In addition, the relations between these freedoms and investment in physical and human capital are examined, to be able to isolate the direct and indirect effects on growth.

Competitio, 2010

This paper, relying on a conceptualization of economic freedom in terms of kinds of government actions, develops a new measure of economic freedom. However, this is not art for art’s sake; instead, it allows us to provide an explanation for how particular institutions of economic freedom enhance economic development, a view upon which scholars agree. We develop two concepts related to economic freedom, namely the freedom-compatible and freedom-non-compatible institutions and use them as tools in an analysis of the process of economic growth, especially the relationship between economic freedom and long-run income. The major argument is that freedom-compatible institutions are primary determinants of income, while freedom-non-compatible institutions depend upon them and are partly the outcomes of the growth process itself, a fact which is explained by the Misesian theory of interventionism. Our regression analyses support our theoretical insights. JEL Classification: B53, H10, O10

European Journal of Political Economy, 2006

In this paper we apply meta-analytic techniques to the literature on the impact of economic freedom on economic growth and find an overall positive direct association between economic freedom and economic growth. A positive indirect effect of economic freedom on economic growth through the stimulation of physical capital is also identified. However, the literature is affected by specification bias with respect to controls for physical capital. The omission of physical capital results in larger estimates of the economic freedom-economic growth association. Further, the use of panel data leads to smaller estimates of the impact of economic freedom on economic growth. The meta-analysis is confirmed by primary cross-sectional and panel data analysis of 82 countries for the period 1970-1999. D

The Empirical Economics Letters, 2018

This paper examines the effect of economic freedom on economic growth in 35 OECD countries using 1996-2015 annual data by panel data analysis. For this purpose, the economic freedom index produced by the Heritage Foundation is used and a three-step econometric method is followed. In the first stage, the stationarities of the variables, which are the index of economic freedom and GDP per capita, are investigated and the variables are found stationary at the first differences. In the second stage, long run relationships are found between the variables. In the third stage, the long run relationships between the variables are estimated by FMOLS (Fully Modified Ordinary Least Squares) and DOLS (Dynamic Ordinary Least Squares) methods. According to the findings, it is found that 1-unit increase in the index of economic freedom leads to 860 dollars increase in GDP per capita approximately in terms of panel. On the other hand, in terms of Turkey case, 1-unit increase in the index of economic freedom leads to 287 dollars increase in GDP per capita.

2007

This paper seeks to bring a better understanding of the relationship between economic growth and the disaggregated factors which constitute the elements of economic freedom. The two main objectives of this paper are to: (1) based on the Solow augmented growth model, test which of the elements of economic freedom demonstrate a statistically significant relationship to economic growth; and (2) establish which way the main causality direction between economic freedom and growth runs from. Finally, we identify desirable directions for further research and policy implications.

Revista Latinoamericana de Desarrollo Económico, 2005