Economic Freedom Of The World Research Articles

Economic freedom and growth, income, investment, and inequality: A quantitative summary of the literature

AbstractThis study examines the published estimates on the relationship between economic freedom, as measured by the Economic Freedom of the World (EFW) index, and measures of growth, income, investment, and inequality. We obtained 696 point estimates for economic freedom‐growth from 54 articles, 386 estimates for economic freedom‐income from 23 articles, 343 estimates for economic freedom‐investment from 32 articles, and 759 estimates for economic freedom‐inequality from 26 articles. The published estimates support the view that economic freedom is positively related to growth, income, and investment. The level of economic freedom appears to be simply unrelated to inequality, though increases in economic freedom may correlate with higher inequality.

A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods

The cross-country relationship between economic freedom and inequality is explored using matching methods. This approach addresses selection bias and endogeneity generally better than extant studies. Meaningful increases in the Fraser Institute's Economic Freedom of the World (EFW) index are related to changes in (i) decile income shares, (ii) decile income levels, and (iii) Gini coefficients. Increased economic freedom is associated with significant gains across the income distribution. It is also associated with modest increases in inequality – associated particularly with gains in the top income decile.

Effects of Economic Freedom on Subjective Well-Being

Are people more likely to be satisfied with their lives if they had freedom from regulations, if they had the ability to trade freely internationally? In light of the demographic aging phenomenon we are facing, the present study analyzes the relationship between economic freedom and life satisfaction among European older adults. In order to do so, we are using data from the European Health, Ageing, and Retirement Survey and Economic Freedom of the World. By using the ordered logit regression method, we estimated different models to identify how sub-indicators of economic freedom affect the subjective well-being. According to the findings, the quality of the institutions that define the legal system and establish rules for the protection of private property and sound monetary policy have a positive effect on subjective well-being. On the other hand, openness to international trade has a negative effect and government and regulation doesn’t show any significance.

Economic Freedom of the World - 2021 Annual Report

Economic Freedom of the World - 2021 Annual Report

Economic freedom of the world: wholly owned subsidiaries and joint ventures as binary response

Drawing on the institutional perspective, the economic freedom index along with its sub-components are analysed and their impact on the choice between wholly owned subsidiary and joint venture investments from India is empirically tested. The results of the binary logistic model reveal that economic freedom and all its sub-components are decisive factors in explaining the choice of entry modes. More specifically, rule of law, government size, and market openness positively determine the probability of wholly owned subsidiary over joint venture while regulatory efficiency and overall economic freedom index are negative regressors while controlling for market size and market stability. The distinguishing feature of the study is that foreign market entry choice from an economic freedom perspective is not present in the extant literature, so this study enriches the literature in this regard. Further, besides the expected probability of choosing a particular entry mode, the marginal change across the variables is also analysed.

Reform complementarities and growth: Evidence and mechanisms

AbstractWhen reforms of different policy areas are said to be complementary, the presence of one reformed area bolsters the effectiveness of reform of the other. We use the five areas of the Economic Freedom of the World (EFW) index over 2000–2017 to test for the impact of reform complementarities on real per capita income growth in up to 131 countries. Using a novel index for complementarity (Braga De Macedo & Oliveira‐Martins, 2008, Econ. Transit.), we find robust evidence that pursuing broader reform packages is associated with an increase in annual growth by about 1.2%. Further analysis shows that the effect of complementarities operates largely through its positive impact on domestic investment.

The role of institutions in the early entrepreneurial process

Abstract Much entrepreneurship research has focused on explaining why some countries and regions have more entrepreneurial activity than others, and the role played in this regard by cross-national and cross-regional differences in institutions. However, this stream has not considered entrepreneurship from a process perspective that is, as a set of activities that unfold over different, discernible stages, and has therefore not examined how institutions and policies impact entrepreneurship in different stages of the process. To address this highly policy-relevant gap, we consider the role of institutions for both nascent and realized entrepreneurship, combining cross-country data of entrepreneurial nascency and start-up activity with standard measures of institutions in structural models to obtain estimates of the moderating and mediating effects of policies and institutions of different quality. Analyzing data on early entrepreneurial activities from the Global Entrepreneurship Monitor, data on new firm formation from the World Bank, and Economic Freedom of the World and Doing Business data, we find that a larger government sector leads to lower levels of both measures of entrepreneurship, while legal quality only impacts later-stage entrepreneurship. In general, the main impact of institutions lies in the later stage of entrepreneurship. We suggest that attention allocation by entrepreneurs may help explain these findings.

Gospodarczy LONG COVID – kontekst konstytucyjny i perspektywa ekonomiczna

The aim of this article is the analysis of the constitutional context of government interventions of the European Union states as a result of the COVID-19 pandemic, with an indication of the effects on economic freedom. An analysis was made of the constitutional provisions of the European Union member states in shaping the economic system and economic freedom guarantees, as well as a comparative analysis of three economic freedom indicators: Index of Economic Freedom, Economic Freedom of the World and The Oxford Covid-19 Government Response Tracker. Research showed that despite the constitutional guarantees of economic freedom, the scope and intensity of the preventive measures undertaken by the governments in order to counteract the health, social, and economic effects of the pandemic may cause a long-term restriction of freedom and democracy. The conclusions presented in this article are the result of research that is a continuation of analyses, the synthesis of which is presented in the publication „The constitutional principle of economic freedom and COVID-19 – state interventionism in pandemic conditions” (“Constitutional Law Review” 2021, no. 5/63).

Economic Freedom: The Top, the Bottom, and the Reality. I. 1997-2007.

We recall the historically admitted prerequisites of Economic Freedom (EF). We have examined 908 data points for the Economic Freedom of the World (EFW) index and 1884 points for the Index of Economic Freedom (IEF); the studied periods are 2000–2006 and 1997–2007, respectively, thereby following the Berlin wall collapse, and including 11 September 2001. After discussing EFW index and IEF, in order to compare the indices, one needs to study their overlap in time and space. That leaves 138 countries to be examined over a period extending from 2000 to 2006, thus 2 sets of 862 data points. The data analysis pertains to the rank-size law technique. It is examined whether the distributions obey an exponential or a power law. A correlation with the country’s Gross Domestic Product (GDP), an admittedly major determinant of EF, follows, distinguishing regional aspects, i.e., defining 6 continents. Semi-log plots show that the EFW-rank relationship is exponential for countries of high rank (≥20); overall the log–log plots point to a behaviour close to a power law. In contrast, for the IEF, the overall ranking has an exponential behaviour; but the log–log plots point to the existence of a transitional point between two different power laws, i.e., near rank 10. Moreover, log–log plots of the EFW index relationship to country GDP are characterised by a power law, with a rather stable exponent () as a function of time. In contrast, log–log plots of the IEF relationship with the country’s gross domestic product point to a downward evolutive power law as a function of time. Markedly the two studied indices provide different aspects of EF.

Міжнародні макросоціальні показники як аналітичні інструменти в соціології

В статті розглянуто ряд ініційованих міжнародними інституціями проєктів, які є джерелом системи показників для порівняльного вивчення суспільств(-а) на глобальному рівні, а також розширюють спектр методичних і аналітичних інструментів у соціології. Автори виокремлюють наступні обмеження при використанні даних міжнародних порівняльних проектів – це порівнюваність, інтерпретація та рейтингування. Обмеження спричинені соціально-культурними відмінностями країн, відсутністю єдиної системи фіксації статистичних даних у державах, різною кількістю країн-учасниць проєктів, варіативністю джерел первинних даних для обчислення індексів. До означених причин варто додати і політичну ситуацію в державі.
 Аналіз даних на рівні окремої країни потребує розгляду даних за усі роки її участі у проєкті та обов’язкове звернення до змістового наповнення індексу та його складових.
 Цінність дослідження полягає також у акумуляції електронних посилань про міжнародні проекти в межах одного джерела, що спрощує пошук необхідної інформації. Проте кількість і тематична варіативність міжнародних макросоціальних показників є значно більшою, тож перспективи цього дослідження полягають у розширенні їх кола, детального аналізу окремих інституцій і/або проєктів, які їх конструюють, тематичних наукових дослідженнях з використаннях макросоціальних показників.

THE PLACE OF ECONOMIC FREEDOM IN THE ECONOMIC POLICY OF THE COUNTRY

A market economy is based on economic freedom, which is revealed in freedom of choice. Choice is the main precondition for competition, and competition is the main driving force of economic development. Economic freedom contributes to the development of the economy of country and the well-being of the population the country depends on it. The International Heritage Foundation has been conducting annual surveys since 1995 on the fulfillment of these conditions in 180 countries around the world, including Georgia. The index of economic freedom in Georgia changes every year. A country is considered economically free if it does not restrict individual choice, voluntary exchange, freedom of competition. A necessary condition is the protection of private property. In an economically free society, every person has the full right, at his own discretion and in the conditions of free choice, to achieve his own goals, the state does not interfere in its activities and choices. It should be noted that economic freedom does not mean economic independence. At the present stage of society's development, the economic activities of any economic entity are so intertwined, so dynamic and in-depth, that the notion of economic independence sounds more an anachronistic than a 21st-century achievement.This applies to relations between countries, as well as relations between individuals and legal entities. Economic freedom means, above all, freedom of choice. Index of Economic Freedom (Economic Freedom of the World) is a measure of economic freedom compiled by the Heritage Foundation, a leading center for American policy research and ,,The Wall Street Journal“ . This index has been established since 1995.The world rating of "economic freedom" has a great importance in terms of further attracting investment in the country. The Index of Economic Freedom is based on ten criteria. These are: freedom of business, freedom of trade, fiscal freedom, government costs, monetary freedom, freedom of investment, financial freedom, property rights, freedom from corruption, freedom of labor. The information on the results of survey of the Heritage Foundation "Economic Freedom Index" 2020 is posted on the official website of the Ministry of Economy and Sustainable Development of Georgia, according to the survey 2020 of the "Heritage Foundation" Index of Economic Freedom " rating score of Georgia reached a historical maximum - 77.1 points, it was promoted by 4 positions in the world ranking and took the 12th position. Compared to the previous year, Georgia was promoted by 2 positions in the European region - with this result Georgia is in the 6th place among 45 countries in the European region with the status of "mostly free". Total score ofGeorgia exceeds both the regional (69.8 points) and the world average point (61.6 points). In our view, property rights are crucial in this large system of valuation. In terms of private ownership, the benefit or loss is the property of the owner, which gives him an incentive to use the resource efficiently. When a resource is transferred to collective ownership, the responsibilities are dispelled, and the different motives of the owners ultimately make the preservation and reasonable use of that resource less possible. An even worse result is achieved if the asset becomes state-owned, because then the liability for profit and loss is not dispersed but divided among different groups.There are known cases in the Czech Republic, Poland and Hungary, where after the end of socialism, the profitability of privately owned companies increased by an average of 77% in just a few years. There are many such stories in the former socialist countries, although privatization is a permanent process in developed countries as well, and the value of privately owned assets around the world has, in fact, been rising every year since the 1980s.

Distilling Institutions? On the Principal Components of Liberal and Other Measures of Governance

This paper applies principal component analysis to the institutional dimensions which underlie Economic Freedom of the World and Worldwide Development Indicators in an exploratory manner to shed additional light on earlier literature. Using the data together, the first four principal components roughly correspond to, respectively, good governance, weak liberalizations, illiberal democracies, and the institutional environment of Latin American. Results from the exercise speak to methodological concerns regarding the inclusion of the size of government in measures of economic freedom, while identifying one dimension of institutions (weak liberalizations) that is nonobvious and conceptually useful. This exercise suggests that interpretations of similar analysis should be altered considerably.

Liberalizing, state building, and getting to Denmark: analyzing 21st-century institutional change

AbstractThis paper undertakes a descriptive analysis of changes in economic institutions across countries from 2000 to 2016, using Economic Freedom of the World and the “State Economic Modernity” index. This latter index is a recent creation, similar conceptually to state capacity, measuring what can variously be thought of as state building, effectiveness, and economic power. These two indexes are used in concert with one another to classify countries into eight directions of institutional change. Despite recent pessimism, countries besides those at the top world income bracket have continued to liberalize, while wealthy countries have merely stagnated. At the high level aggregates, there is little movement in state economic modernity over this period, although there is considerably heterogeneity among individual countries. Of those measured, Rwanda is the single country to make the greatest movement toward the development benchmark of “Getting to Denmark.”

Aging Populations and the Size of Government

Aging populations continue to put strain on government finances, as such demographic shifts cause fewer tax dollars and more citizens on pension programs. What effect does this have on the size of government across countries worldwide? We study this using the Economic Freedom of the World (EFW) index published by the Fraser Institute. One fifth of the index is comprised of measures of the size of government. We investigate whether the share of the population over 65 has a negative impact on this measure of the size of government, as well as whether it has a negative impact on the narrower measure of subsidies and transfers published in EFW. Using standard panel methods we find support for this hypothesis. These results are supported by the use of the aged dependency ratio as a robustness check.

Liberalizing, State Building, and Getting to Denmark: Analyzing Twenty-First Century Institutional Change

This paper undertakes a descriptive analysis of changes in economic institutions across countries from 2000-2016, using Economic Freedom of the World and the “State Economic Modernity” index. This latter index is a recent creation, similar conceptually to state capacity, measuring what can variously be thought of as state building, effectiveness, and economic power. State Economic Modernity can also be thought of as the economic institutions associated with social democracy. These two indexes are used in concert with one another to classify countries into eight directions of institutional change. Despite recent pessimism, countries besides those at the top income bracket have continued to liberalize, while wealthy countries have merely stagnated. At the high level aggregates, there is little movement in “State Economic Modernity” over this period, although there is considerably heterogeneity among individual countries. Rwanda is the single country to make the greatest movement towards the development benchmark of “Getting to Denmark,” while, directionally, Democratic Republic of the Congo, Benin, Guinea-Bissau, and Indonesia have made significant positive movements as well.

Kirznerian and Schumpeterian entrepreneurship in Trinidad and Tobago

PurposeThis paper aims to highlight the possibility that the same cultural and/or institutional environment can differentially affect each of the two moments of entrepreneurship – opportunity identification and opportunity exploitation. It is possible that the cultural and institutional environment in a particular place may encourage opportunity identification, but discourage opportunity exploitation, or vice versa. Specifically, this paper argues that understanding entrepreneurship in Trinidad and Tobago requires that we focus on how Trinidadian culture and institutions differentially affect both moments of entrepreneurship.Design/methodology/approachTo examine how Trinidad and Tobago’s culture and institutions affect entrepreneurial opportunity identification and exploitation in that country, the paper uses a qualitative approach. In total, 25 subjects agreed to interviews, conducted in July and August 2009 in Trinidad. The questions were geared at understanding attitudes toward work and entrepreneurship in Trinidad, and how politics, culture and ethnicity interacted with those attitudes. The paper also examined institutional indicators from the Economic Freedom of the World: 2013 Annual Report and the World Bank’s 2016 Doing Business Report.FindingsThe research identified features of the cultural and institutional environment in Trinidad and Tobago that help to explain why opportunity identification is relatively common among all ethnic groups there, but why opportunity exploitation appears relatively suppressed among African–Trinidadians. In particular, the research finds that the inheritance of British institutions, a post-colonial political culture, a post-colonial business culture and ethnically based social networks all have positive and negative influences on each moment of entrepreneurship.Research limitations/implicationsFurther research would involve an analysis of a wider set of both formal and informal entrepreneurial activities in Trinidad and Tobago, across industries and periods.Practical implicationsThis paper has implications for understanding the complex nature of entrepreneurship, which many policymakers try to encourage, but which is shaped by deep cultural and historical factors, and also indirectly influenced by state policies and laws.Social implicationsEthnic patterns in entrepreneurship shape the way groups see themselves and others.Originality/valueWhile authors writing about opportunity recognition/identification and opportunity exploitation have captured the important dimensions of entrepreneurship, they underestimate the possibility of a disconnect between entrepreneurial identification and exploitation. Focusing on instances where the disconnect exists allows us to move away from characterizations of cultures as progress-prone or progress-resistant, and instead allows us to focus on these gaps between identifying and exploiting entrepreneurship across cultures.

Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions

We examine how country-level institutional context moderates the relationship between three socio-cognitive traits—entrepreneurial self-efficacy, alertness to new business opportunities, and fear of failure—and opportunity entrepreneurship. To do this, we blend social cognitive theory (SCT) with institutional theory to develop a multi-level model of entrepreneurial entry. We merge data from the Global Entrepreneurship Monitor (GEM) surveys and the Economic Freedom of the World (EFW) index for 45 countries from 2002 to 2012. Our results, which are based on a multi-level fixed-effects model, suggest that entrepreneurs' self-efficacy and alertness to new opportunities promote opportunity entrepreneurship while fear of failure discourages it. However, the strength of these relationships depends on the institutional context, with entrepreneurial self-efficacy and alertness substantially more likely to lead to new opportunity-driven ventures in countries with higher levels of economic freedom. These results provide suggestive evidence that economic freedom not only channels individual effort to productive entrepreneurial activities, but also affects the extent to which individuals' socio-cognitive resources are likely to mobilized and lead to high-growth entrepreneurship.

Capital is not enough: opportunity entrepreneurship and formal institutions

We examine how economic institutions, measured by the Economic Freedom of the World (EFW) index, affect the relationship between capital—human, social, and financial—and opportunity-motivated entrepreneurship (OME). To do this, we develop a multi-level model that connects theories of human and social capital at the micro-level to institutional theories at the macro-level. Using data from the Global Entrepreneurship Monitor (GEM), we then test the predictions of our model and find evidence that economic institutions play a crucial role in the relationship between these three distinct types of capital and OME. Our results are somewhat counter-intuitive—as the quality of the institutional environment improves, human and financial capitals become less important determinants of entrepreneurship while the relationship between social capital and entrepreneurship substantially strengthens.

Economic Freedom of the Worlds in the 1950s and 1960s

This paper uses newly gathered and available data and autoregressive methods to create an economic freedom index for the 1950s and 1960s for up to 95 countries. This index is designed to be as compatible as possible with the Economic Freedom of the World (EFW) index published annually by the Fraser Institute. Finally, the new index is used to investigate recent a claim attributed to Jeffrey Sachs by Tyler Cowen that institutions are poor predictors of long term economic growth.

Entrepreneurship, corruption and economic freedom

PurposeThe purpose of this paper is to extend the literature on entrepreneurship and corruption by examining the link between productive and unproductive entrepreneurial activities as moderated by economic freedom. Specifically, the authors hypothesize that various aspects of economic freedom are contextual in their moderating effects, so that what matters in terms of economic freedom will depend on other factors such as levels of human capital.Design/methodology/approachThe authors test these hypotheses by incorporating aggregated and disaggregated measures from the Economic Freedom of the World into a model of international entrepreneurial activity.FindingsThe results indicate that not only is economic freedom a major determinant of the level of entrepreneurial activity across countries, as previously verified, but that it also moderates the relationship between human capital, corruption, and productive entrepreneurship.Originality/valueThese findings resolve many of the ambiguities previously identified in the literature on the link between corruption, entrepreneurship, and growth.