Economic Freedom and Growth:Decomposing the Effects

Fredrik Carlsson and Susanna Lundström
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Susanna Lundström: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

No 33, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: Most studies of the relation between economic freedom and growth of GDP have found a positive relation. One problem in this area is the choice of economic freedom measure. A single measure does notreflect the complex economic environment and a highly aggregated index makes it difficult to draw policy conclusions. In this paper we investigate what specific types of economic freedom measures that are important for growth. The robustness of the results is carefully analysed since the potential problem with multicollinearity is one of the negative effects of decomposing an index. The results show that economic freedom does matter for growth. This does not mean that increasing economic freedom, definedin general terms, is good for economic growth since some of the categories in the index are insignificant and some of the significant variables have negative effects.

Keywords: Economic growth; Economic freedom (search for similar items in EconPapers)
JEL-codes: O10 O40 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2001-02-02
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (3)

Published in Public Choice, 2002, pages 335-344.

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Journal Article: Economic Freedom and Growth: Decomposing the Effects (2002)
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