Components Of Economic Freedom Research Articles

오차수정모형을 이용한 금융발전의 영향요인 분석

This study empirically analyzed the effected determinants of global innovation, economic freedom, and GDP on financial development. An analysis was conducted by the OLS error correction model using panel data(N=224) from 2011 to 2019 of 28 countries. The results showed that economic freedom was the most influential factor in global financial development, and that global innovation and GDP also had a positive impact. Among components of economic freedom, property rights, money soundness, and market openness were found to have a positive impact on financial development, while regulations and government size were found to have a negative impact on financial development. And among components of global innovation, market sophistication, human capital research, infrastructure, knowledge and technology outputs, and business sophistication had an impact on financial development, but institutions and creative outputs did not appear to have an effect. This results has an academic importance of showing that economic freedom and innovation is more important factors than GDP for global financial development. Thus it is assumed that an advanced free-market economy system with a fair legal framework and a constant innovation is important for financial development in global environment where neo-protectionism is spreading.

Does economic freedom foster education in Sub‐Saharan Africa?

AbstractThis study investigates the effect of economic freedom on education in Sub‐Saharan Africa. We used a panel of 41 countries covering the period 2000–2019 and the two‐stage least squares (IV‐2SLS) estimates. We find that economic freedom fosters secondary education. Furthermore, we find that the five components of economic freedom have varying effects on education. Indeed, size of government increases secondary education. Legal system increases secondary and tertiary education, while freedom to trade fosters primary and secondary education. In contrast, sound money has a negative impact on primary and tertiary education. These results are robust when we consider education by gender.

A multidimensional free market and income inequality in developing Asia: How does the quality of governance matter?

AbstractThis paper empirically examines how a free market, a governance quality (GQ) and their interaction simultaneously affect income inequality in 23 Asian developing countries over the period 2000–2019. Especially, different dimensions of a free market proxied by various components of economic freedom (EF) are analysed. Results show that the overall EF and three of its components, including labour freedom, trade freedom and investment freedom, reduce income inequality; but other components, including business freedom (BF), monetary freedom (MF) and financial freedom (FF), widen income inequality. Meanwhile, the GQ not only decreases income inequality but also intensifies the beneficial impacts of the overall EF and those respective components of EF on income equality. Notably, at certain thresholds of GQ, the detrimental impacts of BF, MF and FF on income equality turn into the advantageous ones. The findings consolidate the appropriate combination of free market with specific dimensions and the GQ in boosting the equality of income distribution in Asian developing countries.

Economic freedom influences economic growth and unemployment: an analysis of the Eurozone

Lack of economic growth and a high unemployment rate imply poverty and inequality. Economic freedom is considered a relevant explanatory factor for growth, employment and the distribution of income. The present research work addresses how policy makers should take into account economic freedom aspects to effectively enhance a country’s economic growth and lower its unemployment rate. This study analyses the effect of four components of economic freedom (business freedom, labour freedom, government integrity, tax burden) on the mean GDP growth of the last 5 years, and also on unemployment. A cross-national analysis, based on data from the 23 Eurozone3 (Eurozone and part of its enlargement) Member Countries, examines the causal configurations of GDP and unemployment by a fuzzy-set qualitative comparative analysis. The results suggest that the combination of high levels of business freedom, labour freedom and government integrity triggers high levels of economic growth and lowers the unemployment rate.

MANAGEMENT OF THE DEVELOPMENT AND COMPETITIVE POSITIONS OF BUSINESS ENTITIES: MODELING THE INFLUENCE OF THE FACTORS OF THE INSTITUTIONAL ENVIRONMENT

The relevance of the issues of research in the field of identification and analysis of the influence of external environmental factors on entrepreneurial activity and the formation of competitive positions of business entities is substantiated. The purpose of the study is to provide a scientific basis for the theoretical and methodological aspects of managing the development and competitive positions of business entities and conducting econometric modeling of the influence of the factors of the institutional environment on the effectiveness of the tools of this direction of management. The factor load of the components of the index of economic freedom in Ukraine in 2000-2020 was estimated, which made it possible to determine the characteristic numbers of the correlation matrix for the components of the index of economic freedom in the country. The results of the assessment of the relationship between the turnover of small business entities per resident and the components of economic freedom in Ukraine are presented. The factor loading of the components of the indicator of the ease of conducting business activities of small business entities in Ukraine was calculated. Interrelationships between the volume of business activity and the components of the indicator of the quality of the business environment in Ukraine have been revealed. The scientific novelty of the research results lies in the improvement of the methodology for modeling the influence of external environmental factors on the development and strengthening of the competitive positions of business entities. The applied value of the obtained research results consists in establishing a complex of prerequisites that hinder the development and strengthening of the competitive positions of business entities in Ukraine, in particular in terms of the predominance of departmental interests over the interests of the country and the business sector, low effectiveness of regulatory legislation, limited responsibility of the authorities for obstacles to the functioning of sub business entities.

The effect of sanctions on economic freedom

AbstractWhen states are targeted with sanctions, they may respond with alterations of their domestic economies meant to counter any negative effects of sanctions. In this article, we argue that these alterations tend to lead to increased state command of the economy and reduced economic freedom, as sanctions create opportunities and incentives that encourage target states and firms within them to pursue increased state control of the economy. These declines in economic freedom may come about through a number of causal mechanisms, several of which will be elaborated upon in this article. We use large‐N empirical analysis of all aspects of the Fraser Institute's Index of Economic Freedom and find that sanctions associate with reductions in most components of economic freedom.

ANALYSIS OF INSTITUTIONAL FACTORS AS PART OF THE COMPONENT OF ECONOMIC FREEDOM AS A BACKGROUND OF IMPROVEMENT OF STRUCTURAL PROPORTIONS IN THE CONTEXT OF IMPROVING GOVERNANCE

Purpose – the main purpose of the study is to analyze the institutional factors that are usually considered as components of economic freedom, as well as to assess the level of economic freedom as a prerequisite for improving structural proportions and stimulating the investment process in an economy with excess raw materials sector (such as Ukraine). Research methodology – the methodological basis is a system of complementary mathematical, general scientific and special methods, in particular system-structural comparison of retrospective, diagnostics and mathematical methods of studying possible dependence, general methods of analysis and synthesis, etc. Findings – the main result of the study is that increasing the degree of economic freedom in Ukraine contributes to structural shifts in favour of non-resource exports. Research limitations – our assessment methodology does not take into account the specifics of most European countries and is mainly aimed at countries of Eastern Europe so far. Practical implications – our proposed methodology for assessing the dependence of structural changes in a country’s exports on the economic freedom index IEF can be used in the practice of public administration in countries of such countries as Ukraine and others. Originality/Value – a proposed method for estimating the dependence of structural changes in Ukrainian exports on the IEF Index of Economic Freedom.

What Would Make Morocco an Emerging Economy?

Morocco is steadily progressing toward development and may well join the ranks of rich countries as early as in 2022. We perform least squares regressions on a sample of 12 components of economic freedom, for a total of 375 observations over 25 years (1995-2019). We also consider Morocco’s Gross Domestic Product (GDP) in USD billion, Morocco’s GDP growth as a percentage of change (pcGDP)and Morocco’s per capita GDP based on purchasing power parity (PPP) in USD for the last 25 years. The empirical evidence shows that during this period, Morocco achieved an enviable level of performance by increasing its GDP by 455%, despite the strong demographic pressures exerted by 35% population growth.[1] 
 
 However, the country’s performance in relation to some components of its economic freedom was so weak that it may end up jeopardizing this economic development momentum, as expressed by the behaviour of its pcGDP and the increase of this value over time. Morocco must introduce some fundamental changes in its economic freedom policies if it wishes to continue to progress. Fortunately, the country appears to have the determination to do so.
 
 [1]According to the IMF, Morocco’s population grew from 26.7995 million in 1995 to 36.47 million in 2019, an increase of 36%.

Influence of institutional economics on firm birth and death: A comparative analysis of hospitality and other industries

This paper investigates how public policies, such as taxes and regulations influence firm formation (birth) and closure (death) in the hospitality and other industries in the United States (US), using an institutional economics approach and the dimensions of the Economic Freedom of North America (EFNA) index. The literature has been scant when it comes to examining the effects of policies of formal institutions on firms’ birth and death in the hospitality industry, and whether these effects in hospitality differ from those of other sectors. The study uses panel data from government sources and the EFNA dimensions and applies cross-sectional dependence and unit root tests, followed by a panel generalized least square approach for the analysis. Our findings show that components of economic freedom have varying effects on firms’ birth and death. The study provides practical contributions for policymakers and managers by improving the understanding of firm births and deaths in the US.

Local Governments and Economic Freedom: A Test of the Leviathan Hypothesis

Geoffrey Brennan and James M. Buchanan, in their 1980 book The Power to Tax, hypothesize that “the potential for fiscal exploitation varies inversely with the number of competing governmental units in the inclusive territory.” This paper tests that theory at the local level using data for US metropolitan statistical areas (MSA). MSAs are constructed on the basis of commuting patterns and are meant to delineate the local economy. Because of their construction, MSAs typically contain several distinct and nonoverlapping political jurisdictions, each with the power to tax residents, mitigate local externalities, and provide local public goods. Following previous literature, we measure “competing governmental units” using the number of general-purpose local governments within an MSA, adjusted for land area and population. In contrast to previous work, which uses less comprehensive measures of “fiscal exploitation,” we test Brennan and Buchanan’s “Leviathan hypothesis” using various measures of MSA economic freedom, rather than more limited measures of spending or revenue, as our dependent variable. We find mixed evidence that the number of competing jurisdictions is positively associated with economic freedom. When examining the individual components of economic freedom, we find a positive and statistically significant relationship with labor market freedom but only a weak relationship with government spending or taxes. These results offer mixed support for the Leviathan hypothesis, though support strengthens when metro areas in the South are excluded.

Economic freedom and crashes in financial markets

Using a unique empirical approach that accounts for the possibility that financial market crashes are endogenously determined by market structures, this study examines how economic freedom contributes to crashes in financial markets. On one hand, economic freedom might provide an unregulated framework that contributes to the likelihood of crashes. On the other hand, economic freedom may mitigate regulatory uncertainty thus providing a level of transparency that reduces the likelihood of crashes. Results in this study provide strong support for the latter idea as countries with higher levels of economic freedom experience lower probabilities of market crashes and more positive skewness in asset returns. A closer examination of the data suggest that the components of economic freedom that contribute most to the reduction in crash risk is the level of free trade and, to some extent, the strength of property-right protection.

Economic Freedom and Crashes in Financial Markets

Using a unique empirical approach that accounts for the possibility that financial market crashes are endogenously determined by market structures, this study examines how economic freedom contribute to crashes in financial markets. On one hand, economic freedom might provide an unregulated framework that contributes to the likelihood of crashes. On the other hand, economic freedom may mitigate regulatory uncertainty thus providing a level of transparency that reduces the likelihood of crashes. Results in this study provide strong support for the latter idea as countries with higher economic freedom experience lower probabilities of market crashes and more positive skewness in asset returns. A closer examination of the data suggest that the components of economic freedom that contribute most to the reduction in crash risk is the level of free trade and, to some extent, the strength of property right protection.

The more the merrier? Economic freedom and entrepreneurial activity

The current research addresses the question of how policy makers might design specific components of economic freedom (EF) to most effectively encourage high levels of entrepreneurial activity (EA). Given that entrepreneurship is a multifaceted phenomenon, the study analyzes the effects of four components of EF on EA and relies on fuzzy-set qualitative comparative analysis (fsQCA) to do so. The research collates data from 63 different countries and analyzes EA as it applies to factor-driven, efficiency-driven, and innovation-driven economies. The current research also differentiates between opportunity-driven entrepreneurship and necessity-driven entrepreneurship. The results suggest that the effects of EF vary according to the developmental stage of an economy and the type of EA in question. The results reveal that simplistic explanations implying that high levels of EF trigger high levels of EA regardless of a country's developmental stage are inadequate.

Economic freedom–growth nexus in European Union countries

ABSTRACTThis study examines the economic freedom and economic growth nexus in a panel of 28 European Union countries. We investigate the relationship between growth and different components of economic freedom, measured in five major areas of the Economic Freedom of the World index. The aim of the article is to assess which aspects of economic freedom – and to what extent – contribute to economic growth in the EU. Our empirical analyses suggest that the results are sensitive to the method of estimation. Using the Generalized Method of Moments estimator which allows addressing endogeneity, we found a positive relationship between economic growth and four of the five aspects of economic freedom: security of property rights, quality of monetary policy, freedom to trade and regulatory policies.

The Impact of Economic Freedom on Entrepreneurial Activity - A Configurational Analysis

In this paper we provide an answer to the research question, how particular components of economic freedom (EF) need to be designed in order to most effectively allow for high levels of entrepreneu...

Economic freedom and the stability of stock prices: A cross-country analysis

This paper investigates the link between economic freedom and the price stability of individual securities in a unique setting. Using a sample of 327 American Depositary Receipts (ADRs), we find an inverse relation between the economic freedom of a ADRs' home country and the price volatility of the ADR. This negative correlation is driven primarily by certain components of economic freedom, such as property right protection, the soundness of the money, and the level of free trade in the home country. Further, we find evidence that less regulation and less government control of markets in the home country leads to more stable ADR prices.

English

This paper examines the determinants of multifactor productivity in a cross-country study of 33 African countries. Among others, we specifically focus on the role of economic freedom, and its sub-components, as defined by the Heritage Foundation/Wall Street Journal Economic Freedom Index (EFI). The empirical results show that the economic freedom index (and most of its components) has a positive and statistically significant impact on the productivity of African nations. The components of economic freedom that are critically important to enhancing productivity of African countries are: Business freedom, investment freedom, financial freedom, property rights freedom and freedom from corruption. We also investigate ‘bivariate granger-causality’ between economic freedom and total productivity. The results show that economic freedom granger-causes total factor productivity in most of these countries, but the other way around is not true. Key words: Africa, economic freedom, granger-causality, productivity.

Economic Freedom and the Stability of Stock Prices: A Cross-Country Analysis

This paper investigates the linkage between macroeconomic factors and the price stability of individual securities in a unique setting. Using a large sample of 327 American Depositary Receipts (ADRs), we test whether economic freedom in the ADR home country reduces the level of ADR volatility. Our tests show an important inverse relation between home-country economic freedom and ADR volatility indicating that an increase in the level of economic freedom in the home country improves the stability of ADR prices. We find that the direct relation between economic freedom and price stability is driven primarily by certain components of economic freedom, such as property right protection, the soundness of the money, and the level of free trade in the home country. Further, we find some evidence that less regulation and less government control of markets in the home country leads to more stable ADR prices.

Corruption and the effects of economic freedom

The prediction that economic freedom is beneficial in reducing corruption has not been found to be universally robust in empirical studies. The present work reviews this relationship by using firms' data in a cross-country survey and argues that approaches using aggregated macro data have not been able to explain it appropriately. We model cross-country variations of the microfounded economic freedom–corruption relationship using multilevel models. Additionally, we analyse this relationship by disentangling the determinants for several components of economic freedom because not all areas affect corruption equally. The results show that the extent of the macro-effects on the measures of (micro)economic freedom for corruption, identified by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more corruption. Estimations for Africa and transition economy subsamples confirm our conjectures.

Institutions and economic growth: A study in a cross- section of countries

The neoclassical prediction, which is that lower income countries tend to grow faster than the high income countries, is often found to be inconsistent with the empirical research results. Researchers argue that neoclassical hypothesis holds merely when countries are similar with respect to structural parameters for preferences, hence institutions, and technology. If this similarity dissolves, no convergence should be expected between poor and rich countries. As countries tend to become more similar in institutional climate, faster growth should emerge. In this work, we endeavor to examine the relationships between economic growth and institutional variables such as overall economic freedom as well as its components. Having introduced a formal model, we found that the growth rate of real per capita GDP was positively associated with overall economic freedom, government size, fiscal freedom and trade freedom for a sample of countries in the period 1995 to 2008. Other components of economic freedom in the Heritage index were not significantly related to economic growth. We also found that growth was unrelated to Socialism and to Weberian thesis. Finally, customary variables, which are level of real per capita GDP, initial human capital, physical capital and population, were also found to be significant. Key words: Growth, economic freedom, heritage index, A±nstitutions.