Economic Freedom and Institutional Convergence

Niklas Elert () and Daniel Halvardsson ()
Additional contact information
Daniel Halvardsson: Ratio, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

No 200, Ratio Working Papers from The Ratio Institute

Abstract: Francis Fukuyama argues that liberal democracy is the final form of human government and will become more and more prevalent in the long term. If this prediction is true, countries should converge in their political and economic systems toward liberal democracy, a form of institutional convergence. In this paper, we examine whether there is convergence in economic institutions, drawing on the literatures of economic convergence and of industrial organization. We use the Economic Freedom of the World-index over the period 1970-2009 to proxy for economic institutions. Our results indicate that countries with lower institutional quality experience faster institutional change than countries with higher quality, i.e., we observe institutional convergence. But countries with lower institutional quality have higher variability of institutional change. Using distributional analysis, we examine institutional transition probabilities, and find that the probability of a country ending up with high-quality institutions is high in the long-run. These findings support Fukuyama's prediction.

Keywords: Economic Freedom; Institutional Convergence; Institutions; The Law of Proportionate Effect (search for similar items in EconPapers)
JEL-codes: D78 P11 P21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-10-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://ratio.se/app/uploads/2014/11/ne_dh_-working_paper_200_elert_trippleh.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ratio.se/app/uploads/2014/11/ne_dh_-working_paper_200_elert_trippleh.pdf [308 Permanent Redirect]--> https://ratio.se/app/uploads/2014/11/ne_dh_-working_paper_200_elert_trippleh.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:ratioi:0200

Access Statistics for this paper

More papers in Ratio Working Papers from The Ratio Institute The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Martin Korpi ().