 Revisiting the relationship between economic freedom and development to account for statistical deception by autocratic regimesSean P. Alvarez, Vincent Geloso and Macy Scheck European Journal of Political Economy, 2024, vol. 85, issue C Abstract: The literature connecting economic freedom indexes to income levels and growth generally points in the direction of a positive association. In this paper, we argue that this finding is a conservative one as the data is biased against finding any effects. The bias emerges as a result of the tendency of dictatorial regimes to overstate their GDP level. Dictatorships also tend to have lower scores of economic freedom. This downwardly biases any estimations of the relation between income and economic freedom. In this paper, we use recent corrections to GDP numbers – based on nighttime light intensity – to estimate the bias. We find that the true effects of economic freedom on income levels are between 1.1 and 1.62 times greater than commonly estimated. For economic growth, the bias is far smaller. Finally, we find suggestive evidence that the relationship between changes in economic freedom and economic growth is being underestimated as a result of the lies of dictators regarding GDP. Keywords: Economic freedom; Economic growth; Dictatorship; Development (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:85:y:2024:i:c:s017626802400079x DOI: 10.1016/j.ejpoleco.2024.102577 Access Statistics for this article European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung More articles in European Journal of Political Economy from Elsevier |
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