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Journal of Economics and Finance

, Volume 40, Issue 4, pp 829–840 | Cite as

Institutional convergence: exit or voice?

  • Joshua C. HallEmail author
Article

Abstract

There is a small but growing literature on the determinants of economic freedom. This paper contributes to this literature in two ways. First, it is empirically shown that β-convergence in economic freedom occurred from 1980 to 2010. Countries with low levels of economic freedom in 1980 “catch up” at a rate of 0.7 percent a year on average, ceteris paribus. Second, the structural characteristics that contribute to this institutional convergence are documented. Conditional convergence estimates suggest democratic institutions do not con- tribute to conditional convergence. Exitability, a variable that captures how easy it is for citizens to “vote with their feet” is related to the change in economic freedom from 1980 to 2010 in a statistically significant manner across all specifications. This provides some preliminary evidence as to the importance of “exit” versus “voice” with respect to the question of institutional change.

Keywords

Convergence Economic freedom Institutional change Democracy Exit 

JEL classification

O1 O43 P1 P48 

Notes

Acknowledgments

The author would like to thank the John Templeton Foundation and the Free Market Institute at Texas Tech University for financial support. Matthew Brown also generously shared his data on exitability. Comments from James Payne, Russell Sobel, Andrew Young, and Benjamin Powell were very helpful in revising the paper.

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Copyright information

© Springer Science+Business Media New York (outside the USA) 2015

Authors and Affiliations

  1. 1.Department of Economics, College of Business and EconomicsWest Virginia UniversityMorgantownUSA

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