Abstract
We investigate the causes of increases in economic freedom by examining a cross section of countries from 1990 to 2010 and examining factors that have previously been associated with increases in freedom alongside other factors which have been found to be important for growth. We find that higher initial GNI per capita is associated with larger subsequent increases in economic freedom and countries are less likely to improve their freedom the higher their initial level of freedom, energy exports, and ethnolinguistic fractionalization. When we test subsamples, we find that little explains changes in freedom in countries with high levels of initial freedom, initially high incomes, and that did not receive foreign aid.
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Notes
La Porta et al. (2008) found this relationship also hold holds for Scandinavian and German based legal systems.
The countries used in our sample are: Albania, Algeria, Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Benin, Bolivia, Botswana, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Colombia, Democratic Republic of the Congo, Republic of the Congo, Costa Rica, Cote d’Ivoire, Cyprus, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Gabon, Germany, Ghana, Greece, Guatemala, Honduras, Hong Kong, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Jordan, Kenya, South Korea, Luxembourg, Madagascar, Malaysia, Mexico, Morocco, Namibia, Nepal, Netherlands, New Zealand, Nicaragua, Niger, Nigeria, Norway, Oman, Pakistan, Panama, Paraguay, Peru, The Philippines, Poland, Portugal, Romania, Senegal, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syria, Tanzania, Togo, Trinidad & Tobago, Tunisia, Turkey, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Zambia, and Zimbabwe. Due to unavailable data we omitted the countries Bahrain, Oman, Kuwait, Iran, and Democratic Republic of the Congo when we tested for ethnolinguistic fractionalization. We omitted Iceland, South Korea, Cyprus, Malta, Benin, Hong Kong, and Democratic Republic of the Congo due to data unavailability for executive constraint. We omitted Haiti, Kuwait, and Jamaica when we tested for the logarithm of the initial GNI per capita.
We also used a correlation matrix to test the relationship between our independent variables. The correlation between the Initial level of economic freedom and logarithm of Initial GNI per capita was 0.74. The correlation between deep inflationary and growth crises variables was 0.72. The correlation between Aid and the logarithm of initial GNI per capita was −0.6. The correlation between Medium Growth Crises and initial economic freedom was −0.53. All other correlations between variables were less than 0.5.
We also tested the effect of religious affiliation on the change in economic freedom by using binary variables to represent if the majority of a nation’s population considered themselves Christians, Muslims, or Buddhists We found that religious affiliation did not provide significant explanatory power.
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Acknowledgments
We thank Audrey Redford, Kathleen Sheehan, and the participants at the Free Market Institute’s seminar series for helpful comments on earlier drafts and the John Templeton Foundation for financial support.
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This study was funded by the John Templeton Foundation ($10,000).
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March, R.J., Lyford, C. & Powell, B. Causes and barriers to increases in economic freedom. Int Rev Econ 64, 87–103 (2017). https://doi.org/10.1007/s12232-016-0263-2
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DOI: https://doi.org/10.1007/s12232-016-0263-2