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On the relationship between economic freedom and economic growth
by
Jakob de Haan and Jan-Egbert Sturm
Anna Bonarska
Elizabeth Rivard
23.10.2007
Individuals have economic freedom when:
Property protection
No arrangements that restrain the realization of gains from economic activities
23.10.2007
Comparison of two EFI
Heritage Foundation/Wall street Journal (Holmes et al., 1998) 10 elements
Fraser Institute (Gwartney et al., 1996) 17 elements
Aspects:
1. International trade2. International capital flows3. Black market4. Taxes5. Government intervension6. Monetary policy and inflation7. Banking8. Price controls and regulation
and Market entry9. Property rights
23.10.2007
Criticism of Fraser Institute and Heritage Foundation EFI’s
Taxes
Government spending and consumption
Inflation
23.10.2007
Review of previous empirical studies
Lack of sensitivity analysis
Link between economic freedom and economic growth depends on the measure used
No studies found that economic freedom does not influence growth
23.10.2007
New evidence
The growth equation included the following: M: a vector of standard economic
explanatory variables F: indicator of economic freedom Z: a vector of up to three possible
additional economic explanatory variables
23.10.2007
Conclusion
More economic freedom will bring countries more quickly to their steady state level of economic growth, but that level of syteady state growth is not affected by the level of economic freedom.