A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods

Justin T. Callais and Andrew T. Young

Journal of Comparative Economics, 2023, vol. 51, issue 3, 744-777

Abstract: The cross-country relationship between economic freedom and inequality is explored using matching methods. This approach addresses selection bias and endogeneity generally better than extant studies. Meaningful increases in the Fraser Institute's Economic Freedom of the World (EFW) index are related to changes in (i) decile income shares, (ii) decile income levels, and (iii) Gini coefficients. Increased economic freedom is associated with significant gains across the income distribution. It is also associated with modest increases in inequality – associated particularly with gains in the top income decile.

Keywords: Economic freedom; Income deciles; Inequality; Matching methods; Causal inference; Institutional economics (search for similar items in EconPapers)
JEL-codes: D63 P00 P16 P48 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:51:y:2023:i:3:p:744-777

DOI: 10.1016/j.jce.2023.03.001

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