Abstract
This paper analyzes the impact of economic freedom along with traditional economic factors on economic growth for a panel of European countries. The growth of the gross domestic product was observed over a twenty-year time period on a sample of 43 developing and developed countries. Based on a robust dynamic panel setting, we conclude that increases in economic freedom as expressed by the Index of Economic Freedom/Heritage Foundation (but not its levels) are related to economic growth. The EU membership status either had no effect or it curbed the effect of the economic freedom on growth. We also find that the subprime economic crisis of 2008–2009 exerted a negative impact on the growth of European economies.
Highlights
IntroductionThis research uses data from the Index of Economic Freedom of Heritage Foundation in order to define and measure the impact of economic freedom on the total production of goods and services, expressed through the growth of gross domestic product (GDP)
Considering that modern economic growth theories highlighted economic freedom as an important factor of economic development and prosperity in a country (e.g., Justesen 2008; Kacprzyk 2016), we examine this potential relationship on a sample of European countries.This research uses data from the Index of Economic Freedom of Heritage Foundation1 in order to define and measure the impact of economic freedom on the total production of goods and services, expressed through the growth of gross domestic product (GDP)
At times troubled by global economic crises and geopolitical frictions, when it is difficult to stimulate economic growth, this paper investigates whether economic freedom is a factor that can
Summary
This research uses data from the Index of Economic Freedom of Heritage Foundation in order to define and measure the impact of economic freedom on the total production of goods and services, expressed through the growth of gross domestic product (GDP). The Index of Economic Freedom comprises of -weighted ten categories that define the state of economic freedom.. The Index of Economic Freedom comprises of -weighted ten categories that define the state of economic freedom.2 2 In 2017, the Heritage Foundation made some methodological changes, so the Index of Economic Freedom has had 12 components as opposed to the previous 10. The new component is “Judicial Effectiveness” belonging to the Rule of Law pillar and “Fiscal Health” as the new factor of the Government size pillar. 3 It is worthwhile to state that we do not investigate the effects of the individual components of the Index of Economic
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