Economic freedom and human capital investment

Horst Feldmann

Journal of Institutional Economics, 2017, vol. 13, issue 2, 421-445

Abstract: Using data from 1972 to 2011 on 109 countries, this paper empirically studies the impact of economic freedom on human capital investment. Enrollment in secondary education is used as a proxy for such investments. Controlling for a large number of other determinants of education, it finds that, over the sample period, economic freedom had a substantial positive effect. This is probably because more economic freedom increases the return on investing in human capital, enables people to keep a larger share of the return, and, by facilitating the operation of credit markets, makes it easier for them to undertake such investments in the first place.

Date: 2017
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