Transcript Economic freedom, investment and growth

Economic freedom, investment and
growth
GRA 5917: Public Opinion and Input Politics
Term Paper Proposal
Alexandru Sarbu
Purpose
To study the impact of capital investment and
economic freedom on economic growth, with
focus on Sub-Saharan Africa.
Theory
Economic freedom leads to economic growth
(Edwards; de Haan and Sturm; Tupy; Weede)
Investment leads to economic growth
(Dawson; Gelb, Ramachandran and Turner)
Question
To what extent?
Kimlong Chheng
Economic freedom, domestic investment rate, and FDI have a robust
association with per capita GDP growth in all the 50 countries over
the period. All types of capital investment interact positively and
closely with economic freedom to generate growth-enhancing
externalities. To attain growth, it requires investment and favorable
economic freedom, fostered by government policies and institutions.
Government share or public expenditure is negatively correlated
with growth. The phenomenon can be expectedly predicted if the
excessive expenditure goes to unproductive sectors.
The initial per capita GDP in logarithms is negatively correlated
with subsequent growth rate.
Kimlong Chheng
Growth=α0 + β1LogGDPIi + β2EFi + β3IGDPi +
+β4PubEGDPi + β5DmLDCs +
+β6DmDeveloping + β7(EF*IGDP) +
+β8FDIGDP + εi
Model
Growth=α0 + β1EFi + β2IGDPi + β3DmLDCs + β4DmDeveloping+
+ β5(EF*IGDP) + εi
Drop LogGDP and PubEGDP
Merge IGDP and FDIGDP (New dataset doesn’t differentiate)
Data
Alan Heston, Robert Summers and Bettina
Aten, Penn World Table Version 6.3
Fraser Institute 2009
Discussion
Will dropping the initial real per capita GDP in
logarithms at each starting period of the fiveyear intervals and the real government
expenditure to real GDP ratio alter the result?
Are the dummies necessary? (Some countries
have changed status)