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Public Choice

, Volume 112, Issue 3–4, pp 335–344 | Cite as

Economic Freedom and Growth: Decomposing the Effects

  • Fredrik Carlsson
  • Susanna Lundström
Article

Abstract

Most studies of the relation between economic freedom andgrowth of GDP have found a positive relation. One problem inthis area is the choice of economic freedom measure. A singlemeasure does not reflect the complex economic environment anda highly aggregated index makes it difficult to draw policyconclusions. In this paper we investigate what specific typesof economic freedom measures that are important for growth.The robustness of the results is carefully analysed since thepotential problem with multicollinearity is one of thenegative effects of decomposing an index. The results showthat economic freedom does matter for growth. This does notmean that increasing economic freedom, defined in generalterms, is good for economic growth since some of thecategories in the index are insignificant and some of thesignificant variables have negative effects.

Keywords

Economic Growth Public Finance Economic Environment Positive Relation Economic Freedom 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Fredrik Carlsson
    • 1
  • Susanna Lundström
    • 1
  1. 1.Department of EconomicsGöteborg UniversityGöteborgSweden

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