Which Economic Freedoms Contribute to Growth? A Comment

Jan-Egbert Sturm, Erik Leertouwer and Jakob de Haan

Kyklos, 2002, vol. 55, issue 3, 403-416

Abstract: Most studies on the relationship between economic freedom and growth employ a measure of economic freedom based on an (ad hoc) aggregation of various underlying components. We argue that the alternative aggregation procedure as recently suggested by Heckelman and Stroup (2000) — in which aggregation is directly based upon the relevance of each component for growth, as determined by multivariate regression analysis — is seriously flawed. We present an alternative index based on latent variable estimation techniques. Using standard robustness analyses we find that this index of economic freedom is not robustly related to economic growth.

Date: 2002
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