Economic Freedom Research Articles

Economic globalisation and Africa's quest for greener and more inclusive growth: The missing link

This study examines the contingency and threshold effects of economic freedom in the economic globalisation (EG) and inclusive green growth (IGG) relationship. To this end, we apply the fixed-effects generalized method of moments with Driscoll-Kraay standard errors estimator to macro data for the period 2008–2020 for 22 selected African countries. The following findings are established. First, we find that economic freedom reduces the negative effect of EG on IGG. Second, when we disaggregate EG into financial and trade globalisation, we show that the moderating effect of economic freedom on the former is rather striking. Third, our threshold analysis suggests that by improving Africa's unfree economic architecture to 60% (moderately free), the IGG-deteriorating marginal effects of EG are significantly mitigated (but not nullified). We conclude that unless an effort is made to improve economic freedom in Africa, the envisaged IGG gains of economic globalisation might prove elusive.

Technological innovation and energy efficiency in central Eastern European countries

This study examines the causal relationship between technological innovation and energy efficiency in Central and Eastern European countries. The results indicate that technological innovation significantly impacts energy efficiency in the Czech Republic, Latvia, Lithuania, Slovakia, and Slovenia through various economic and political factors. Conversely, energy efficiency also significantly affects technological innovation in Estonia, Hungary, and Slovakia. These findings suggest that energy efficiency is a function of the rate of innovation adoption. It is recommended that these countries prioritize implementing reforms that bolster economic freedom and institutional quality to foster innovation.

Evaluating the Influence of Taxation Levels on the Degree of Economic Freedom of Countries

Evaluating the Influence of Taxation Levels on the Degree of Economic Freedom of Countries

Rawls and Economic Liberties

Rawls and Economic Liberties

МОДЕЛІ «ДЕРЖАВИ ЗАГАЛЬНОГО ДОБРОБУТУ» ТА ЇХНІ ХАРАКТЕРИСТИКИ

The article examines the peculiarities of the welfare state model, which has been constantly changing, transforming, having different options for implementation, going through a crisis and post-crisis development. It is determined that only the state, in the policy of the welfare state, acts as a guarantor of social rights and opportunities for its citizens. The author reveals the types of welfare models and their main characteristics that determine the peculiarities of social policy implemented by countries. It is established that the model of the “welfare state” has experienced an economic, ideological and philosophical crisis, which has led to the need to update and modernize the conceptual foundations of its implementation. The author proves that changes in the country’s social policy allow for a clear distinction between programmatic retrenchment and systematic retrenchment, i.e., reduction of social programs or reduction of social expenditure financing in the welfare state model. The author reveals the typology of models of management of the state social policy, in particular: pluralistic, corporate, Marxist and elite models. It is proved that the main social task of the state’s economic policy is “not to distribute benefits, but to ensure the conditions of freedom and independence of individuals who are able to create these benefits and take care of themselves and their families on their own”. The modern version of the socio-economic model of the “welfare state” is to create conditions that will ensure the synergy of market self-regulation and state intervention, and can be implemented in the areas of economic freedom and personal development. In addition, the areas of development of the welfare state are: risks and innovations, social solidarity, social justice, lifelong support, distribution of difficulties between generations, which is part of the concept of sustainable development. It is established that the transformation of the welfare state model leads to a change in the mechanisms and instruments for its implementation, in particular: universalization of social expenditures; policy coherence between social, economic and environmental aspects of development; search for inclusive forms of its implementation and partnership between the State, civil society and business; identification of new directions in global and regional social policy. It is established that the choice of implementing the “welfare state” model depends on the historical, socio-cultural and economic conditions prevailing in a country and is determined by the type of its socio-political system, ideological and spiritual principles, and the peculiarities of the stage of development. Key words: welfare, state, models of the welfare state, social justice, social security.

How does climate change risk affect energy poverty? International evidence.

Based on cross-country data from 2002 to 2019, we explore the impact of climate change risk (CCR) on energy poverty (EP), and the moderating role in the CCR-EP nexus is also discussed. The empirical results suggest that CCR can exacerbate EP, especially for rural areas. Moderating effect analysis shows that financial development, technological innovation, and adaptation readiness can modify the negative impacts of CCR on EP to some extent. Moreover, the impact of CCR on EP is heterogeneous, demonstrating that CCR is more likely to exacerbate EP in countries with low economic development, low economic freedom, high carbon intensity, and the Africa region. Our findings emphasize the challenge of balancing EP alleviation with climate change response and provide the policy guidance to promote coordinated development of CCR management and energy supply security.

The effect of education on economic institutions

ABSTRACT This research is the first to use the Heritage Foundation economic freedom index as a measure of economic institutions in order to examine the relationship between education and economic institutions. It presents a variety of empirical evidence to show that education predicts economic institutions whereas the inverse is not true. It uses 2SLS, with the level of education in 1950 as the instrument for the level of education in 2015, and finds that the effect of education on economic institutions is positive and statistically significant. Also, this paper uses fixed effects in order to control for country-level omitted variables that may affect both economic institutions and the instrument. Finally, it uses difference GMM, and system GMM. These regressions exploit both the cross sectional and the time series variation in the data, address endogeneity, and confirm that the effect of education on economic institutions is positive and statistically significant.

The influence of institutional quality, economic freedom, and technological development on Islamic financial development in OIC countries

This study investigates the relationship between Institutional quality, Economic freedom, technological advancement, and Islamic financial development in selected OIC countries. This study employs the panel estimation method to examine annual data pertaining to Islamic bank industries across 22 countries, sourced from the SESRIC database, from 2013 to 2021. The findings show that the overall quality of institutions and economic freedom influence Islamic finance development. Further, the contribution of technological development appears when institutional quality indicates higher performance. Despite the predominant correlation observed among institutional indicators, this study, focusing on a comprehensive index, reveals a consistent and significant contribution of institutional quality to the growth of Islamic finance. Furthermore, this study's findings show that institutional quality and economic freedom are related; yet, the methods by which the foundations of each indicator influence financial development differ. The findings of this research underscore the importance of urging policymakers, particularly governmental authorities, to prioritize the development of policies and initiatives aimed at fostering a healthy and conducive environment. Emphasizing practical and transparent institutional frameworks is essential for cultivating a well-regulated economic environment.

Toward a Sustainable Development of E-Commerce in EU: The Role of Education, Internet Infrastructure, Income, and Economic Freedom on E-Commerce Growth

The emergence of e-commerce reshaped the traditional trade models, also playing a significant role in meeting the UN sustainable development goals. According to the UN, sustained growth and social development must include resilient infrastructure, foster innovation, allow for better access to information and communications technology, and universal and affordable internet infrastructure. This study explores a multidimensional analysis of e-commerce development in the EU generated by the following factors: education, internet infrastructure, income, and economic freedom. We use an ARDL econometric model and Eurostat data. Additionally, we analyze the time responsiveness of e-commerce growth to changes in these factors. In the long run, our findings identify a stable and positive relationship between e-commerce and all these factors. However, in the short run, our results illustrate significant dynamics between two variables and e-commerce. Specifically, the level of internet access and the percentage of individuals who use the internet daily exhibit a positive short-run impact on e-commerce sales, with the system absorbing shocks within a short period. This research advocates for targeted policies that support innovation, fair competition, and consumer protection in the digital economy. This research provides valuable guidance for policymakers and stakeholders in improving the institutional framework to promote a sustainable development of e-commerce in the EU.

Refining the PROMETHEE‐scoring method: Propositions and an economic freedom assessment

AbstractThe recent PROMETHEE‐Scoring approach offers a method for generating cardinal scores through an outranking procedure utilizing Stochastic Multicriteria Acceptability and – analysis. In this paper, we illustrate some undesirable effects of this method and explore possible approaches to address them. First, we modify the original LP by inserting a new constraint that limits negative impacts caused by alternatives with low flow mean and standard deviation. Also, clustering is used to identify outliers in the decision matrix that may induce undesirable effects. A toy example demonstrates the issues and explores the proposed implementations. In addition, a numerical application is presented where a set of countries is ordered based on criteria from an economic freedom assessment. Both the numerical application and the toy example show that the propositions can improve the consistency of the results and prevent inconsistent outputs. The results include comparisons between the rank of alternatives when using purely the PROMETHEE‐Scoring method, the proposed improvements, and the expected results from SMAA‐PROMETHEE.

Impacts of Technological Advancement on Achieving Sustainable Development Goals (SDGs): in Developing Countries

SDG’s goals are immensely affected by technological development. This paper mainly inspects the approaches and trials faced in a developing country: like Bangladesh. Data collection was performed by distributing questions on social media and selecting appropriate random sampling. Forty hundred completed responses were analyzed. The research techniques that were used were empirical and quantitative. Innovation, investment, economic freedom, human development, and globalization are some of the goals that are greatly impacted by digital technological influence. Conversely, inequality in development; lack of global partnership, energy consumption, lack of quality education, etc. are the limitations or reasons that slow down the process. The study discloses these approaches and limitations from different sectors and age groups. The findings have practical and theoretical implications for academics, scholars, institutions, business professionals, and other associated parties keen to identify the impact of technological advancement on SDGs.

A bibliometric analysis of economic freedom: current status and future research directions

PurposeThe purpose of this study is to examine and identify the predominant themes in the literature on economic freedom. The paper also highlights the key journals, leading authors, top countries and organisations in the literature on economic freedom.Design/methodology/approachThis paper uses the Scopus database to examine 1,512 articles covering the disciplines of economics, finance, business and social sciences from 1942 to 2022. Vosviewer software is used for creating bibliometric networks.FindingsThe findings suggest that significant growth in the economic freedom literature has occurred in the last ten years. Considerable attention has been devoted to examining the relationship between economic freedom and growth. The paper also finds that most of the research on economic freedom has been undertaken in the context of developed countries.Originality/valueThis study is one of the first attempts to undertake a bibliometric analysis of economic freedom. The article also highlights the less-researched areas in the literature and thus provides directions for future research.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-09-2023-0690.

Political economy and income inequality: how did trade liberalization and changes in political and economic freedom affect the middle classes across the world?

Political economy and income inequality: how did trade liberalization and changes in political and economic freedom affect the middle classes across the world?

Economic freedom and banks' risk-taking in Japan: a tale of two sides

PurposeThis study examined how economic freedom and its related components, such as open markets, regulatory efficiency, rule of law and the size of government, affect bank risk behavior, focusing on the Japanese context.Design/methodology/approachThe study employs a two-step GMM framework on the annual data of Japanese banks ranging from 2005 to 2020 to empirically test the hypotheses. Furthermore, we also use the ordinary least square method to ensure the robustness of our mainline findings.FindingsThe finding suggests that economic freedom increases the banks' risk-taking, thus making them fragile. The results also highlight that out of the four main subcomponents of economic freedom, regulatory efficiency and government size increase bank risk-taking, while the rule of law and open markets decrease banks' risk-taking. Additionally, we examine how the banks' specific characteristics affect the results by creating a subsample based on capitalization and liquidity ratios. Overall, the results are consistent with the baseline findings. Moreover, the results are robust to alternative proxy measures of risk.Practical implicationsThe study's findings have several implications for regulators and policymakers. The results suggest that regulators and policymakers should reconsider their strategies for economic freedom to ensure that they promote stability in the banking system and reduce banks' risk-taking inclinations.Originality/valueAlthough previous studies have examined the impact of economic freedom on bank stability and risk-taking, this study is the first to do so in the Japanese context, contributing to the literature by providing new insights and empirical evidence.

The implications of economic freedom and gender ideologies on women's opportunity-to-necessity entrepreneurship

PurposeThis study explores the relationship between economic freedom and gender ideologies on the allocation of women’s opportunity-to-necessity entrepreneurship across countries. Opportunity entrepreneurship is typically understood as one’s best option for work, whereas necessity entrepreneurship describes the choice as driven by no better option for work. Specifically, we examine how economic freedom (i.e. each country’s policies that facilitate voluntary exchange) and gender ideologies (i.e. each country’s propensity for gendered separate spheres) affect the distribution of women’s opportunity-to-necessity entrepreneurship across countries.Design/methodology/approachWe construct our sample by matching data from the following country-level sources: the Global Entrepreneurship Monitor’s Adult Population Survey (APS), the Fraser Institute’s Economic Freedom Index (EFI), the European/World Value Survey’s Integrated Values Survey (IVS) gender equality index, and other covariates from the IVS, Varieties of Democracy (V-dem) World Bank (WB) databases. Our final sample consists of 729 observations from 109 countries between 2006 and 2018. Entrepreneurial activity motivations are measured by the ratio of the percentage of women’s opportunity-driven total nascent and early-stage entrepreneurship to the percentage of female necessity-driven total nascent and early-stage entrepreneurship at the country level. Due to a first-order autoregressive process and heteroskedastic cross-sectional dependence in our panel, we estimate a fixed-effect regression with robust standard errors clustered by country.FindingsAfter controlling for multiple macro-level factors, we find two interesting findings. First, economic freedom positively affects the ratio of women’s opportunity-to-necessity entrepreneurship. We find that the size of government, sound money, and business and credit regulations play the most important role in shaping the distribution of contextual motivations over time and between countries. However, this effect appears to benefit efficiency and innovation economies more than factor economies in our sub-sample analysis. Second, gender ideologies of political equality positively affect the ratio of women’s opportunity-to-necessity entrepreneurship, and this effect is most pronounced for efficiency economies.Originality/valueThis study offers one critical contribution to the entrepreneurship literature by demonstrating how economic freedom and gender ideologies shape the distribution of contextual motivation for women’s entrepreneurship cross-culturally. We answer calls to better understand the variation within women’s entrepreneurship instead of comparing women’s and men’s entrepreneurial activity. As a result, our study sheds light on how structural aspects of societies shape the allocation of women’s entrepreneurial motivations through their institutional arrangements.

The Impact of Culture on the Demand for Non-life Insurance Penetration in Developing Countries: Panel Data Analysis

Purpose: The impact of insurance market activity within financial development is gaining more attention in academia, as the sector experiences growth within emerging markets. The paper aims to understand which macro-economic and social variables impact the growth or decline of the non-life insurance sector broadly across European countries with a view to provide recommendations to drive increased penetration across the region.
 Methodology: Using Fixed Effects Panel Data Regression and annual data from 1990 to 2021 on 10 countries, the study examines the explanatory factors of non-life insurance demand in European countries (Australia, France, Austria, Italy, Canada, Luxemburg, Denmark, Norway, Finland and Portugal).
 Findings: The study found that GDP, and urbanization and education rates have a significant negative impact on non-life insurance penetration and density; urbanization, religion, education level and rule of law can explain positively variation in non-life insurance density and penetration across countries. Countries with higher urbanization levels, higher education level, Christian or Buddhist beliefs and more effective rule of law spend more on non- life insurance than other countries. The control of corruption and government effectiveness explain negatively variance in non-life insurance.
 Unique Contribution to Theory, Practice and Policy: Notably, governments can develop the non-life insurance sector through policies that support urbanization.Similarly, ensuring an environment that promotes economic freedom (such as low tariff, high personal choice, low government spending and high security of property rights) could be an effective way of promoting non-life insurance demand. In contrast, policies that help to reduce the rate of urbanization may yield a double dividend: less population and congestion in cities and better opportunities for the development of non-life insurance markets. Also, countries with high level of education, can develop the development of non- life insurance demand. Among many socio-economic factors such as income, urbanization and education level, our analysis suggests that cultural dimensions such as beliefs and rule of law play a role.

Economic freedom and foreign direct investment in Brazil: an empirical analysis of determinants and policy implications

PurposeThis paper aims to study the impact of economic freedom and some key macroeconomic variables on the foreign direct investment (FDI) inflow in Brazil.Design/methodology/approachAn econometric model is developed that includes FDI inflow as the dependent variable and macroeconomic variables such as the output, current account balance, the real exchange rate, openness and economic freedom as explanatory variables. Annual time series data from 1995 to 2022 is used. Before carrying out the estimation, the time series properties of the data are diagnosed using unit root tests and cointegration tests. Since the data series were found to be stationary in the first difference form and the variables in the model were cointegrated, an error correction model is developed and estimated.FindingsThe findings demonstrate that the size of the market (gross domestic product), current account balance and the economic freedom index significantly influence FDI inflow to Brazil. Although the signs of openness and the real exchange rate align with theoretical expectations, they do not attain statistical significance.Originality/valueTo the best of the authors’ knowledge, this is the first formal study on the impact of economic freedom on the FDI inflow in Brazil. The finding of this study adds value to the understanding of FDI dynamics in Brazil, highlighting the critical role of economic freedom and market size in attracting foreign investment.

ACTUALIZING THE VENTURING MODEL IN UKRAINE

The financing of innovations is the driving driver of the innovative model of development of any country, and Ukraine in particular. In modern conditions, the importance of venture capital for the economy of Ukraine is growing against the background of reducing alternatives to raising capital for the development of small and high-tech businesses. The reasons for the current state of decline in the innovation and investment process in Ukraine are analyzed and identified. Peculiarities of venture investment in Ukraine are studied. It is determined that the vast majority of venture capital institutions, regardless of their field of activity, are used mainly by large industrial and financial groups to preserve assets and minimize taxation, rather than to finance innovation. The obtained results give grounds for the conclusion that the essence of venture entrepreneurship in Ukraine does not correspond to the American and European models. The current conditions turn venture funds in Ukraine from an instrument of innovative development into a means of making a profit for large financial and industrial groups, which is a hidden reason for slowing down the innovation and investment process. An updated Ukrainian venture model is proposed, taking into account the peculiarities of the economy and a thorough rethinking of the existing structure of venture capital. The introduction of a rational combination of public, private, and research components of the investment process is proposed, i.e. the need to involve universities, scientists, and the scientific elite in the venture industry. It is determined that this model is only one of the components of a comprehensive program to stimulate investment demand, which also includes: ensuring macroeconomic stability; ensuring economic freedom; ensuring economic security; an increase of investment resource; impact on investment propensity; liberalization and development of the financial market; stimulating investment activities through the mechanism of state support for business and science partnerships.

Institutions as predictors of government discrimination

AbstractExclusion of some groups caused by the misuse of government power remains a major problem across the world. We propose that market‐oriented institutions and policies have the capacity to reduce such exclusion. To test this, we use an overall measure derived from the V‐Dem dataset, capturing government discrimination based on political group, social group, socio‐economic group, and gender, which we combine with the Fraser Institute's Economic Freedom of the World index. The sample consists of 153 countries for 1970–2020, which we organize in a panel consisting of consecutive, non‐overlapping 5‐year periods, rendering up to about 1,200 observations. Our estimates show a clear negative association between the rule of law and government discrimination in electoral democracies and electoral autocracies but not in single‐party autocracies. There are, however, reasons for not considering the finding for electoral autocracies causal. Two further areas of economic freedom seem to matter: free trade is negatively related to government exclusion in electoral democracies, while regulatory freedom is so in both types of autocracies. Thus, it seems as if a market‐economic system may be able to constrain public officials in the direction of non‐discrimination.

Underperforming reformers: Examining disappointing cases of economic reforms

AbstractWhile pro‐market economic institutions are a strong and causal predictor of economic development, such institutions are not expected to have the same impact across countries. Furthermore, there are actually a few instances where countries that enacted market‐friendly reforms had negative economic growth soon after. Examining 49 cases of large and sustained increases in economic freedom over a five year window, we find 10 cases that were followed by low/negative economic growth thereafter. We consider various potential determinants of failed reforms by comparing different measures between the successful and failed reforming countries. Our strongest evidence points to the following as plausible reasons for failed reforms: culture (high levels of power distance, low levels of individualism, and low levels of generalized trust), areas of economic freedom that countries reformed (less focus on sound monetary policy, more focus on limiting the size of government, and more variance between the five areas), and autocratic political institutions.