Higher Levels Of Economic Freedom Research Articles

ENTROPY BASED EVALUATION OF THE IMPACT OF EDUCATION ON ECONOMIC DEVELOPMENT

In contemporary economic landscapes, effective managerial decision-making requires serious justifications often facilitated by information technologies. The article proposes the application of the foundational principles from information theory and entropy to determine the correlation between education and economic development. This research employs entropy methodology to explore the correlations and implications of these multifaceted domains, drawing insights from a range of global indices. By analyzing data from indices such as the Human Development Index, we investigate the relationship between average years of education and entropy values, shedding light on the diversity and standardization of human capital systems across nations. Moreover, economic indexes, encapsulating factors such as economic freedom and innovation, provide critical insights into the vibrancy and resilience of national economies. Through the lens of the Global Innovation Index, we explore how countries with higher levels of economic freedom and innovation efficiency exhibit less diversity in economic approaches and innovation strategies, leading to a reduction in entropy values. By examining entropy values in conjunction with innovation indicators, such as research and development expenditure and patent applications, we uncover patterns and trends indicative of the diversity or standardization of innovation strategies across countries. Additionally, cybersecurity emerges as a critical dimension of national security and resilience, with implications for economic well-being and societal trust. Through the National Cybersecurity Index, we assess the level of diversity and uncertainty in cybersecurity landscapes, highlighting the importance of robust cybersecurity measures in safeguarding against emerging threats and reducing entropy values. Ultimately, this research contributes to the discourse on sustainable development and resilience in an interconnected world. By identifying specific challenges and opportunities within education, economy, innovation, and cybersecurity domains, it facilitates informed decision-making and strategic interventions to promote inclusive growth and societal well-being on a global scale.

Ranking of Countries according to the Index of Economic Freedom with Multicriteria Decision making Methods

Every investor wants to conduct their economic or commercial activity in a country with ease. Economic freedom refers to the public limitations that individual or institutional investors must abide by in order to conduct their business. Individual or institutional investors have the chance to produce, consume, and invest more in nations with high levels of economic freedom. If a nation has a high level of economic freedom, it means that institutions and norms are founded and that the economy runs under free market circumstances. Individual or institutional investors are protected and their legal rights are upheld by the public authorities. In this study, the level of tariffs in the country, the presence of restrictions on foreign investments and capital, the black market situation, the taxation system in the country, the presence and importance of the public sector in the economy, the inflation in the country, the country's inflation, and the country's level of tariffs are all taken into account on a country-by-country basis. The study was conducted by the Heritage Foundation, which has its headquarters in the United States since 1996. Independence of the banking and financial sectors, controls on the prices of products and services and employee wages, regulation and regulation, investor property rights, etc. The data of the "Economic Freedom Index", which consists of fourteen basic criteria including all stages, were examined. This index consists of ten and includes these criteria. With this study, entropy-weighted multi-qualified benefit for the criteria and weights determined in the index calculated by the Heritage Foundation. It aims to provide a fresh option by ranking the "Economic Freedom Index" for all the study's participating nations using the MAUT approach. Keywords: multi-criteria decision making, economic freedom index, entropy, MAUT

The relationship between economic freedom and growth: Evidence from the Next Eleven (N-11) countries

This study examines the association between economic freedom and economic growth in the Next Eleven (N-11) economies from 2001 to 2020. This paper also links the individual areas of economic freedom with growth in these countries. The study obtains economic freedom data from the Fraser Institute and the Heritage Foundation. It uses fixed effects and random effects techniques to examine the relationship between economic freedom and per capita income growth. The paper finds a positive association between economic freedom and growth in N-11 countries. The results also highlight that three areas of the economic freedom index (legal system & property rights, sound money, and free trade) are found to be positively associated with growth. In contrast, the other two areas (size of government and regulation) exhibit an insignificant relationship with growth. The results of this study highlight that N-11 countries with higher levels of economic freedom and better quality of economic institutions are likely to witness higher growth. Therefore, formulating policies that focus on improving the legal system, safeguarding property rights, maintaining a stable macroeconomic environment, and fostering free trade to facilitate economic progress in the N-11 countries is necessary.

Income Inequality and Economic Freedom: The 2000s

This study examines the relationship between income inequality and economic freedom by using two concepts developed in institutional economics, namely “extractive and inclusive institutions”. We argue that income inequality might be high both in countries with extractive institutions, where the level of economic freedom is low, and in countries with inclusive institutions, where the level of economic freedom is high. We propose a U-shaped relationship between income inequality and economic freedom. We use a panel data set containing 1425 country-year observations from 137 countries for the years from 2000 to 2018 to test our proposition. The results confirm our expectation that the relationship between income inequality and economic freedom is negative at low levels of economic freedom, but positive at high levels of economic freedom.

Measuring the size and dynamics of U.S. state-level shadow economies using a dynamic general equilibrium model with trends

We use a two-sector dynamic deterministic general equilibrium model that specifically accounts for trends among time-series variables to estimate the size of the shadow economy for the 50 U.S. states from 1999 to 2019, following Solis-Garcia and Xie (2018, 2022). This paper improves on existing measures of the state-level shadow economy (such as the multiple indicators, multiple causes (MIMIC) methodology by Wiseman (2013a)). In particular, this new measure is based on theoretical foundations, extends the previous measure to include the Great Recession, includes dollar value estimates of the shadow economy, and produces considerably more variation over time and across states. Furthermore, we explore determinants of this new shadow economy measure using a panel vector autoregressive model and find that, on average, states with higher levels of economic freedom, lower regulatory barriers, and larger real GDP have smaller shadow economies. States with bigger governments, on average, have larger shadow economies, and the effect of corruption on shadow economic activity is non-linear, with a positive initial and subsequent negative impact.

Who gains from economic freedom? A panel analysis on decile income levels

This paper revisits Saccone’s (2020) analysis of the impact of economic freedom on decile income shares for a panel of developed and developing nations during 1980-2014. Saccone found that higher levels of economic freedom corresponded with lower income shares for the bottom 8 deciles and higher shares only for the top 2 deciles. Instead of decile income shares, this paper focuses on the impact of economic freedom on decile income levels. We find that the income per capita for all 10 deciles increases as economic freedom increases.

Exchange Rate Volatility, Currency Misalignment, and Risk of Recession in the Central and Eastern European Countries

This study is aimed at estimation of the exchange rate volatility and its impact on the business cycle fluctuations in four central and eastern European countries (the Czech Republic, Hungary, Poland, and Romania). Exchange rate volatility is estimated with the EGARCH(1,1) model. It is found that exchange rate volatility is affected by the components of the Index of Economic Freedom from the Heritage Foundation, besides inflation and crisis developments. The empirical results using GMM estimation technique and comprehensive robustness checks suggest that exchange rate volatility reduces the risk of recession in the Czech Republic while the opposite effect is found for Hungary and Romania, with a neutrality for Poland. These findings continue to hold after controlling for the fiscal and monetary policy indicators. There is evidence that the RER undervaluation prevents sliding into a recession on a credible basis in Poland only, with a neutral stance for other countries. Except in Romania, higher levels of economic freedom is associated with worsening of the cyclical position of output. Among other results, stabilization policies in the recession imply fiscal tightening for the Czech Republic and Romania, higher money supply for the Czech Republic and Poland, and lower central bank reference rate for Hungary.

Does economic freedom improve health outcomes in sub-Saharan Africa?

PurposeThe purpose of this study is to examine the impact of economic freedom on four key health indicators (namely, life expectancy, infant mortality rate, under-five mortality rate and neonatal mortality rate) by using a panel dataset of 34 sub-Saharan African countries from 2005 to 2016.Design/methodology/approachThe study obtains data from the World Development Indicators (WDI) of the World Bank and the Fraser Institute. It uses fixed effects regression to estimate the effect of economic freedom on health outcomes and attempts to resolve the endogeneity problems by using two-stage least squares regression (2SLS).FindingsThe results indicate a favourable impact of economic freedom on health outcomes. That is, higher levels of economic freedom reduce mortality rates and increase life expectancy in sub-Saharan Africa. All areas of economic freedom, except government size, have a significant and positive effect on health outcomes.Research limitations/implicationsThis study analyses the effect of economic freedom on health at a broad level. Country-specific studies at a disaggregated level may provide additional information about the impact of economic freedom on health outcomes. Also, this study does not control for some important variables such as education, income inequality and foreign aid due to data constraints.Practical implicationsThe findings suggest that sub-Saharan African countries should focus on enhancing the quality of economic institutions to improve their health outcomes. This may include policy reforms that support a robust legal system, protect property rights, promote free trade and stabilise the macroeconomic environment. In addition, policies that raise urbanisation, increase immunisation and lower the incidence of HIV are likely to produce a substantial improvement in health outcomes.Originality/valueExtant economic freedom-health literature does not focus on endogeneity problems. This study uses instrumental variables regression to deal with endogeneity. Also, this is one of the first attempts to empirically investigate the relationship between economic freedom and health in the case of sub-Saharan Africa.

Entrepreneurship, fear of failure, and economic policy

The previous literature finds that self-reported ‘fear of failure’ has a significant negative effect on individuals’ choice to become entrepreneurs. We hypothesize this effect is lessened in economies with a larger number of additional, alternative, entrepreneurial opportunities to pursue if a failure occurs. Prior literature also concludes the number of entrepreneurial opportunities is enhanced significantly by having policies and institutions consistent with higher levels of economic freedom. We therefore test and confirm that fear of failure hurts the entrepreneurial process less when levels of economic freedom are higher as there are more additional chances for failed entrepreneurs to pursue.

Highlighting the connection between financial development and consumption of energy in countries with the highest economic freedom

This study explores the association that financial development, economic freedom, and the price of gasoline had with gasoline consumption in 28 countries with the highest economic freedom for the period 1996–2017. The ARDL analysis methodology was used to construct a heterogeneous dynamic panel to test the panel data. The Westerlund panel cointegration test was then performed to determine if the factors were cointegrated. Finally, we used the Dumitrescu-Hurlin panel causality test in order to develop effective policies. The results state that both financial development and the price of gasoline play an essential role in reducing the consumption of gasoline. Additionally, economic freedom is closely related to an increase in gasoline consumption. By employing the variable of the Global Financial Crisis (GFC), the robustness test shows the negative and statistically significant effect of the latter on gasoline consumption and confirms the main findings. Therefore, the GFC played a crucial role in changing the economic plans of the countries with high levels of economic freedom. This suggests that these countries should reinforce financial development to generate green innovations. Further important policy implications for the 28 countries with the highest economic freedom are provided at the end of the paper.

ECONOMIC FREEDOM AND THE ECONOMIC CONSEQUENCES OF THE 1918 PANDEMIC

The 1918 flu pandemic constituted an exogenous shock on economic activity. In this paper, we condition the economic importance of these shocks on the level of economic freedom measured by the Historical Index of Economic Liberty project to test whether freer economies fared better. Our argument is that higher levels of economic freedom meant a greater ability to adjust to shocks by reducing frictions in the reallocation of resources and the reorganization of economic activity. We find that higher levels of economic freedom mitigated the pandemic's effect. We link this finding with the literature on economic freedom and crises. (JEL I15, N10, N30)

Economic Freedom and the Economic Consequences of the 1918 Pandemic

The Spanish flu pandemic of 1918 constituted a strong exogenous shock on economic activity that compounded that of the First World War. In this paper, we condition the economic importance of these shocks on the level of economic freedom measured by the HIEL project (Prados de la Escosura 2016) to test whether freer economies fared better. Our argument is that higher levels of economic freedom meant a greater ability to adjust to the shocks by reducing frictions in the reallocation of resources and the reorganization of economic activity. We find that countries with higher levels of economic freedom suffered less from the pandemic. We link this finding with the literature on economic freedom and crises.

The Relationship between Military Expenditures and Economic Freedom in the Middle East and North Africa Region

The relationship between military expenditures and economic growth has been widely studied in the literature. However, there are no studies focusing on the relationship between military expenditures and economic freedom in the literature. In countries with high levels of economic freedom, democratic regime transitions are more comfortable. Therefore, military expenditures are expected to decrease as potential internal turmoil, and external threats will be reduced in countries with high economic freedom. This study examines the relationship between military expenditures and economic freedom in 13 MENA countries (Algeria, Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Saudi Arabia, Tunisia, and Turkey) during the period 1996-2018 by using panel data analysis. It was found that economic growth, tax burden, and trade freedom had a positive impact on military expenditures. It was also concluded that property rights, monetary freedom, government integrity, and investment freedom negatively affected military expenditures. Besides, it is understood that there is a bidirectional causal relationship between military expenditures and tax burden, property rights, monetary freedom, government integrity, investment freedom, and business freedom. On the other hand, there is a unidirectional causality relationship from economic growth to military expenditures and from military expenditures to trade freedom.

Does Commercial Diplomacy Overcome Impediments to International Economic Flows? The Case of Australia

Summary This article empirically examines the effectiveness of commercial diplomacy in contributing to Australia’s merchandise exports and inbound foreign investment with 181 countries over the period 2010-2015. The combined effect of diplomatic entities increases Australian exports by 12.9 per cent and increases inbound foreign investment by 16.1 per cent compared to countries without representation. Commercial diplomacy is effective when there are impediments to exporting, such as markets being outside the region and having low economic freedom. Commercial diplomacy substantially boosts inbound investment from countries outside and within the region, from emerging and developed markets, and from countries with high levels of economic freedom.

Cultural Baggage: Do Immigrants Import Corruption?

Do immigrants undermine culture in a way that destroys productivity in destination countries? Some scholars have argued that because immigrants come from countries with dysfunctional social capital—norms and institutions—they will import it and pollute the social capital in destination countries. One potential channel through which this could occur is corruption. We examine stocks and flows of immigrants over a 20‐year time period to see if corruption increased in destination countries. We generally find that immigration is not associated with increases in corruption. Additionally, we find that immigration tends to decrease corruption in destination countries with low levels of corruption or high levels of economic freedom.

Cultural Baggage: Do Immigrants Import Corruption?

Do immigrants undermine culture in a way that destroys productivity in destination countries? Some scholars have argued that because immigrants come from countries with dysfunctional social capital—norms and institutions— they will import it and pollute the social capital in destination countries. One potential channel through which this could occur is corruption. We examine stocks and flows of immigrants over a 20-year time-period to see if corruption increased in destination countries. We generally find that immigration is not associated with increases in corruption. Additionally, we find that immigration tends to decrease corruption in destination countries with low levels of corruption or high levels of economic freedom.

The dynamic properties of institutional reform: an analysis of US states

AbstractDecades of research show that economic freedom is highly correlated with desirable economic outcomes both internationally and locally. Yet we still know little about the transition from low to high levels of economic freedom, particularly for institutions under local control. This research shows that while economic freedom in the United States is decreasing with regard to institutions under national control, it is increasing with regard to institutions under state and local control. Economic freedom increases gradually among the states, driven primarily by increasing labor market freedom. Decreases in economic freedom, on the other hand, occur sharply, often following stark changes to state fiscal policies.

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.

Economic Freedom and Exercise: Evidence from State Outcomes

Exercise is an important part of a healthy lifestyle and influences a variety of health outcomes. Regions vary in their levels of exercise due to geography, climate, culture, and policy. The extent to which a country's policies are consistent with economic freedom has been found to be positively associated with greater participation in physical activity. We empirically investigate the relationship between economic freedom and exercise across U.S. states. Contrary to the cross‐country results, we find that states with higher levels of economic freedom have lower rates of participation in exercise.

Economic Freedom, Migration and Income Change among U.S. Metropolitan Areas

Even though metropolitan area governments have no control over state level monetary, labor, or fiscal policies, they are able to enact policies designed to enhance local living conditions—however determined. Such policies include local taxes, labor and wage policies, and regulations that can differ substantially from other metropolitan areas even within the same state. Collectively such policies create differing levels of economic freedom, as measured by standardized indices. We examine differences in levels of economic freedom across United States metropolitan areas and explore how these differences affect migration patterns and local aggregate and per capita income changes. We find that those metropolitan areas with higher levels of economic freedom tend to experience net in-migration and positive changes in aggregate and per capita income, although the balance between in-state and out-of-state migration confounds these patterns.