Re-Exploring the Nexus Between Economic Freedom and Growth: Is There a Threshold Effect?

Abdessalem Gouider (), Ridha Nouira and Sami Saafi
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Abdessalem Gouider: Imam Mohammad Ibn Saud Islamic University, Saudi Arabia and Gabes University, Tunisia
Ridha Nouira: ISFF and LAMIDED Sousse University, Tunisia
Sami Saafi: FSEG Mahdia, Monastir University and LAMIDED Sousse University, Tunisia

Journal of Economic Development, 2022, vol. 47, issue 3, 147-167

Abstract: This study aims to assess the nonlinear effect of economic freedom on economic growth using a sample of 35 emerging and developing countries over the period 1996-2018. To this end, the threshold regression approach of Hansen (1999, 2000) has been deployed. The panel threshold analysis provides evidence of significant nonlinear relationship between economic freedom and economic growth. The tipping point of economic freedom is around 49.87 for the entire sample. Moreover, our findings prove that the estimated threshold level of economic freedom index in emerging countries (64.097) is significantly higher compared to that of developing countries (48.59). Looking at individual country results, the presence of nonlinear threshold effects of economic freedom on economic growth was confirmed in nineteen out of the thirty-five models. The estimated threshold values are quite heterogeneous, ranging from 35.16 in Zimbabwe to 75.87 in Chile.

Keywords: Economic Freedom; Growth; Panel Threshold Model (search for similar items in EconPapers)
JEL-codes: C14 O43 (search for similar items in EconPapers)
Date: 2022
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