Transcript On the relationship between economic freedom and economic growth

On the relationship between economic
freedom and economic growth
by
Jakob de Haan and Jan-Egbert Sturm
Anna Bonarska
Elizabeth Rivard
Individuals have economic
freedom when:

Property protection

No arrangements that restrain the
realization of gains from economic
activities
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Comparison of two EFI

Heritage
Foundation/Wall
street Journal
(Holmes et al., 1998)

10 elements

Aspects:
1.
International trade
International capital flows
Black market
Taxes
Government intervension
Monetary policy and inflation
Banking
Price controls and regulation
and Market entry
Property rights
2.
3.
4.
5.

Fraser Institute
(Gwartney et al.,
1996)
6.
17 elements
9.

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7.
8.
Criticism of Fraser Institute and
Heritage Foundation EFI’s

Taxes

Government spending and
consumption

Inflation
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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
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New evidence

The growth equation included the
following:



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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
Critique of the model

Population growth

Average export and import ratio to
GDP
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New methodology of Heritage
Foundation EFI
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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.
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Thank you