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A Review on the Relationship Between Political Freedom and Economic Development

Year 2021, Volume: 8 Issue: 1, 1 - 22, 21.03.2021
https://doi.org/10.48064/equinox.857290

Abstract

The Arab Spring has urged reviewing the association of the political and economic variables. There is no consensus in the literature about this relationship. This article reviews the related literature and highlights some guidelines for forming a suitable model to study this relationship accounting for criticisms of various models. Thus, this study recommends that (1), empirically, democracy should be decomposed into its determinants, (2) economic development should include GDP per capita and the development quality indexes, (3) using the V-dem dataset could improve future studies' credibility because it avoids most pitfalls of rival datasets, (4) causality study aids in designing policies to improve economic stability, and (5) using a cross-sectional sample to emphasize the countries specifications` differences when studying the aforementioned relationship.

References

  • Abdul Fatah, F., Othman, N., Abdullah, S. (2012). Economic Development, Political Freedom and Human Development: China, Indonesia and Malaysia. International Journal of Business and Social Science, Vol. 3 No. 1.
  • Acemoglu, D., Johnson, S. and Robinson, J. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. The American Economic Review. Vol 91 No (5):1369-1401.
  • Acemoglu, D., Johnson, S. and Robinson, J. (2013). Why Nations Fall: The Origins of Power, Prosperity and Poverty. Profile Books LTD. 529 Page. Aixalá, J. and Fabro, G. (2009). Economic Freedom, Civil Liberties, Political Rights and Growth: A Causality Analysis. Span Econ Rev 11:165–178.
  • Anwar, S. and Cooray, A. (2012). Financial Development, Political Rights, Civil Liberties and Economic Development: Evidence from South Asia Economic Modelling 29:974-981.
  • Bahmani M., Bamani S., Chakrabarti A., Goswami G. (2006). Political Rights. Civil Liberties and Economic Development. Nova Science Publishers. P.P 1-10.
  • Barro R. (2002). Quantity and Quality of Economic Development. Sources, Trends and Cycles. Edited By Norman Loayza and Raimundo Soto, Santiago, Chile. Central Bank of Chile, Pp 135- 162.
  • Barro, R. (1999). Determinants of Democracy. Journal of Political Economy. 107(S6): 158-183.
  • Bashir M. and Xu C. (2014). Impact of Political Freedom: Economic Freedom and Political Stability on Economic Development. Journal of Economics and Sustainable Development. Vol.5, No.22 .59 – 67.
  • Benyishay, A., Betancourt, R. (2014). Unbundling Democracy: Political Rights and Civil Liberties. Journal of Comparative Economics.
  • Boese, V. A. (2019). How (not) to measure democracy. International Area Studies Review. 22(2). 95-127.
  • Bollen, K. (1990). Political Democracy: Conceptual and Measurement Traps. Studies in Comparative International Development. Vol 25. No I. 7-24.
  • Brunetti A., (1997). Political Variables In Cross-Country Growth Analysis. Journal Of Economic Surveys. Vol. 11, No. 2, PP 163-190.
  • Burkhart, R. and Lewis-Beck, M. (1994). Comparative Democracy: The Economic Development Thesis. The American Political Science Review. Vol. 88, No. 4: 903-910.
  • Butkiewicz J., Yanikkaya H. (2005). The Impact of Sociopolitical Instability on Economic Development: Analysis and Implications. Journal of Policy Modeling 27 629–645.
  • Chris, D. and Ulubasoglu, M. (2004). Institutions and Economic Development: A Systems Approach Econometric Society Australasian Meetings 63, Econometric Society.
  • Coppedge, M., Gerring, J., Lindberg, S. I., Skaaning, S. E., and Teorell, J. (2017). V-Dem comparisons and contrasts with other measurement projects. V-Dem working paper. 45.
  • Çukurçayır S., Tezcan K. (2011). Demokratikleşme Ve Ekonomik Kalkınma: Etkileşim Analizi.Bilgi Ekonomisi Ve Yönetimi Dergisi Cilt: Vı Sayı: Iı S: 48-76.
  • Dawson J. (2003). Causality in The Freedom–Growth Relationship. European Journal of Political Economy Vol. 19 479–495.
  • Doppelhofer, G., Miller, R. (2004). Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach. American Economic Review. Vol. 94 No. 4:813-835.
  • Drury, A., Krieckhaus, J. and Lusztig, M. (2006). Corruption, Democracy, and Economic Development. International Political Science Review. 27(2). Pp121-136.
  • Elff, M. and Ziaja, S. (2018). Method Factors In Democracy Indicators. Politics and Governance (Issn: 2183–2463). Volume 6. Issue 1:92–104.
  • Fariss, C. and Dancy, G. (2017). Measuring the impact of human rights: Conceptual and methodological debates. Annual Review of Law and Social Science. 13, 273-294.
  • Feng Y., (2001). Political Freedom, Political Instability, and Policy Uncertainty: A Study of Political Institutions and Private Investment in Developing Countries. International Studies Quarterly (2001) 45, P.P 271-294.
  • Freedom House Organization. (2019). Freedom in the World 2019. Retrieved from: www.freedomhouse.org .
  • Friedman, M. (2020). Capitalism and Freedom. University of Chicago Press.
  • Gasiorowski, M. (2000). Democracy and Macroeconomic Performance in Underdeveloped Countries An Empirical Analysis. Comparative Political Studies. Vol. 33 No. 3:319-349.
  • Giannone, D. (2010). Political and Ideological Aspects in The Measurement of Democracy: The Freedom House Case. Democratization. 17: 1:68-97.
  • Guseh, J. and Oritsejafor, E. (2007). Government Size, Political Freedom and Economic Development in Nigeria, 1960-2000. Journal of Third World Studies. Vol. Xxiv. P. P 139- 165.
  • Haan J., Siermann C. (1996). Political Instability, Freedom, And Economic Development: Some Further Evidence. Economic Development and Cultural Change, Vol. 44. No. 2:339-350.
  • Hausmann, R., Pritchett, L. and Rodrik, D. (2004). Growth Accelerations, National Bureau of Economic Research, Working Paper 10566.
  • Helliwell, J.(1992). Empirical Linkages Between Democracy and Economic Growtii. Nber Working Papers Series. Working Paper No. 4066.
  • Keefer, P. and Khemani, S.(2004). Why Do the Poor Receive Poor Services?. Economic and Political Weekly. Vol39 No. 9:935-943.
  • Ken Farr, W., Lord, R. and Wolfenbarger, J. (1998). Economic Freedom, Political Freedom, And Economic Well-Being: A Causality Analysis. Cato Journal. Vol. 18, No. 2:247-267.
  • Lajili, O. and Gilles, P. (2018). Financial Liberalization, Political Openness and Growth in Developing Countries: Relationship and Transmission Channels. Journal of Economic Development Volume 43. Number 1.
  • Liu, A. (2016). Why Economic Development Matters Brookings. Retrieved from: https://www.brookings.edu/blog/the-avenue/2016/03/07/whyeconomic-development-matters/.
  • Mbaku J. and Kimenyi, M. (1997). Macroeconomic Determinants of Growth: Further Evidence on The Role of Political Freedom. Journal of Economic Development. Volume 22:119-132.
  • Nalley, L. And Barkley, A. (2005). Political Freedom, Economic Freedom, and Prosperity: International Trade Policy as A Measure of Economic Freedom. Journal of Private Enterprise. Volume Xx1.
  • North Douglass C. (1986). Institutions, Economic Development and Freedom: A Historical Introduction. Canadian Cataloguing in Publication Data. 5-45.
  • Paldam, M. (1998). Does Economic Growth Lead to Political Stability?. The Political Dimension of Economic Growth. 171-190.
  • Polterovich V. and Popov, V. (2007). Democratization, Quality of Institutions and Economic Development. Transformation, Integration and Globalization Economic Research (Tiger). No:102. Warsaw.
  • Przeworski, A. and Limongi, F. (1993). 'Political Regimes and Economic Development'. The Journal of Economic Perspectives. 7(3). 51-69.
  • Rodrik, D. (2000). Participatory Politics, Social Cooperation, and Economic Stability. Political Economy, Governance, and Development. Vol. 90 No. 2, 140-144.
  • Sala-i-martin, X., Doppelhofer, G. and Miller, R. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach, American economic review, VOL. 94 NO. 4:813-835.
  • Salgado, E. (2020). Intra-party democracy index: a measure model from Brazil, Revista de Investigações Constitucionais. 7(1), 107-136.
  • Santhirasegaram, S. (2007). The Impact of Democratic and Economic Freedom on Economic Development in Developing Countries: Pooled Cross Country Data Evidence. Journal of Applied Science 7(11)1484- 1489.
  • Stroup M. (2007). Economic Freedom, Democracy, And the Quality of Life. World Dev 35(1):52–66.
  • Tavarez, J. and Wacziarg, R. (2001). How Democracy Affects Growth, European Economic Review. 45, 1341-1378.
  • Tunçsiper B., Biçen, Ö. (2014). Ekonomik Özgürlükler Ve Ekonomik Büyüme Arasındaki Ilişkinin Panel Regresyon Yöntemiyle Incelenmesi. Eskişehir Osmangazi Üniversitesi Iibf Dergisi 9(2), 25‐ 45.
  • Unit, Economist Intelligence. (2016). Democracy index 2015: Democracy in an age of anxiety.
  • Unit, Economist Intelligence. (2020). Democracy Index 2019. A year of democratic setbacks and popular protest.
  • Vega-Gordillo, M. And Alvarez-Arce, J. (2003). Economic Development and Freedom: A Causality Study. Cato J. 23. 199.
  • Wike, R., Simmons, K., Stokes, B., and Fetterolf, J. (2017). Globally, broad support for representative and direct democracy. Pew Research Center. 16.
  • Yevdokimov, Y., Melnyk, L., Lyulyov, O., Panchenko, O., and Kubatko, V. (2018). Economic freedom and democracy: Determinant factors in increasing macroeconomic stability. Problems and Perspectives in Management. 16(2), 279-290.
  • Yılmaz B. (2018). Why Has China Succeeded? Does China’s Success Contradict Acemoglu And Robınson’s Thesis in Why Nations Fail?. IPC Working Paper.

A Review on the Relationship Between Political Freedom and Economic Development

Year 2021, Volume: 8 Issue: 1, 1 - 22, 21.03.2021
https://doi.org/10.48064/equinox.857290

Abstract

The Arab Spring has urged reviewing the association of the political and economic variables. There is no consensus in the literature about this relationship. This article reviews the related literature and highlights some guidelines for forming a suitable model to study this relationship accounting for criticisms of various models. Thus, this study recommends that (1), empirically, democracy should be decomposed into its determinants, (2) economic development should include GDP per capita and the development quality indexes, (3) using the V-dem dataset could improve future studies' credibility because it avoids most pitfalls of rival datasets, (4) causality study aids in designing policies to improve economic stability, and (5) using a cross-sectional sample to emphasize the countries specifications` differences when studying the aforementioned relationship.

References

  • Abdul Fatah, F., Othman, N., Abdullah, S. (2012). Economic Development, Political Freedom and Human Development: China, Indonesia and Malaysia. International Journal of Business and Social Science, Vol. 3 No. 1.
  • Acemoglu, D., Johnson, S. and Robinson, J. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. The American Economic Review. Vol 91 No (5):1369-1401.
  • Acemoglu, D., Johnson, S. and Robinson, J. (2013). Why Nations Fall: The Origins of Power, Prosperity and Poverty. Profile Books LTD. 529 Page. Aixalá, J. and Fabro, G. (2009). Economic Freedom, Civil Liberties, Political Rights and Growth: A Causality Analysis. Span Econ Rev 11:165–178.
  • Anwar, S. and Cooray, A. (2012). Financial Development, Political Rights, Civil Liberties and Economic Development: Evidence from South Asia Economic Modelling 29:974-981.
  • Bahmani M., Bamani S., Chakrabarti A., Goswami G. (2006). Political Rights. Civil Liberties and Economic Development. Nova Science Publishers. P.P 1-10.
  • Barro R. (2002). Quantity and Quality of Economic Development. Sources, Trends and Cycles. Edited By Norman Loayza and Raimundo Soto, Santiago, Chile. Central Bank of Chile, Pp 135- 162.
  • Barro, R. (1999). Determinants of Democracy. Journal of Political Economy. 107(S6): 158-183.
  • Bashir M. and Xu C. (2014). Impact of Political Freedom: Economic Freedom and Political Stability on Economic Development. Journal of Economics and Sustainable Development. Vol.5, No.22 .59 – 67.
  • Benyishay, A., Betancourt, R. (2014). Unbundling Democracy: Political Rights and Civil Liberties. Journal of Comparative Economics.
  • Boese, V. A. (2019). How (not) to measure democracy. International Area Studies Review. 22(2). 95-127.
  • Bollen, K. (1990). Political Democracy: Conceptual and Measurement Traps. Studies in Comparative International Development. Vol 25. No I. 7-24.
  • Brunetti A., (1997). Political Variables In Cross-Country Growth Analysis. Journal Of Economic Surveys. Vol. 11, No. 2, PP 163-190.
  • Burkhart, R. and Lewis-Beck, M. (1994). Comparative Democracy: The Economic Development Thesis. The American Political Science Review. Vol. 88, No. 4: 903-910.
  • Butkiewicz J., Yanikkaya H. (2005). The Impact of Sociopolitical Instability on Economic Development: Analysis and Implications. Journal of Policy Modeling 27 629–645.
  • Chris, D. and Ulubasoglu, M. (2004). Institutions and Economic Development: A Systems Approach Econometric Society Australasian Meetings 63, Econometric Society.
  • Coppedge, M., Gerring, J., Lindberg, S. I., Skaaning, S. E., and Teorell, J. (2017). V-Dem comparisons and contrasts with other measurement projects. V-Dem working paper. 45.
  • Çukurçayır S., Tezcan K. (2011). Demokratikleşme Ve Ekonomik Kalkınma: Etkileşim Analizi.Bilgi Ekonomisi Ve Yönetimi Dergisi Cilt: Vı Sayı: Iı S: 48-76.
  • Dawson J. (2003). Causality in The Freedom–Growth Relationship. European Journal of Political Economy Vol. 19 479–495.
  • Doppelhofer, G., Miller, R. (2004). Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach. American Economic Review. Vol. 94 No. 4:813-835.
  • Drury, A., Krieckhaus, J. and Lusztig, M. (2006). Corruption, Democracy, and Economic Development. International Political Science Review. 27(2). Pp121-136.
  • Elff, M. and Ziaja, S. (2018). Method Factors In Democracy Indicators. Politics and Governance (Issn: 2183–2463). Volume 6. Issue 1:92–104.
  • Fariss, C. and Dancy, G. (2017). Measuring the impact of human rights: Conceptual and methodological debates. Annual Review of Law and Social Science. 13, 273-294.
  • Feng Y., (2001). Political Freedom, Political Instability, and Policy Uncertainty: A Study of Political Institutions and Private Investment in Developing Countries. International Studies Quarterly (2001) 45, P.P 271-294.
  • Freedom House Organization. (2019). Freedom in the World 2019. Retrieved from: www.freedomhouse.org .
  • Friedman, M. (2020). Capitalism and Freedom. University of Chicago Press.
  • Gasiorowski, M. (2000). Democracy and Macroeconomic Performance in Underdeveloped Countries An Empirical Analysis. Comparative Political Studies. Vol. 33 No. 3:319-349.
  • Giannone, D. (2010). Political and Ideological Aspects in The Measurement of Democracy: The Freedom House Case. Democratization. 17: 1:68-97.
  • Guseh, J. and Oritsejafor, E. (2007). Government Size, Political Freedom and Economic Development in Nigeria, 1960-2000. Journal of Third World Studies. Vol. Xxiv. P. P 139- 165.
  • Haan J., Siermann C. (1996). Political Instability, Freedom, And Economic Development: Some Further Evidence. Economic Development and Cultural Change, Vol. 44. No. 2:339-350.
  • Hausmann, R., Pritchett, L. and Rodrik, D. (2004). Growth Accelerations, National Bureau of Economic Research, Working Paper 10566.
  • Helliwell, J.(1992). Empirical Linkages Between Democracy and Economic Growtii. Nber Working Papers Series. Working Paper No. 4066.
  • Keefer, P. and Khemani, S.(2004). Why Do the Poor Receive Poor Services?. Economic and Political Weekly. Vol39 No. 9:935-943.
  • Ken Farr, W., Lord, R. and Wolfenbarger, J. (1998). Economic Freedom, Political Freedom, And Economic Well-Being: A Causality Analysis. Cato Journal. Vol. 18, No. 2:247-267.
  • Lajili, O. and Gilles, P. (2018). Financial Liberalization, Political Openness and Growth in Developing Countries: Relationship and Transmission Channels. Journal of Economic Development Volume 43. Number 1.
  • Liu, A. (2016). Why Economic Development Matters Brookings. Retrieved from: https://www.brookings.edu/blog/the-avenue/2016/03/07/whyeconomic-development-matters/.
  • Mbaku J. and Kimenyi, M. (1997). Macroeconomic Determinants of Growth: Further Evidence on The Role of Political Freedom. Journal of Economic Development. Volume 22:119-132.
  • Nalley, L. And Barkley, A. (2005). Political Freedom, Economic Freedom, and Prosperity: International Trade Policy as A Measure of Economic Freedom. Journal of Private Enterprise. Volume Xx1.
  • North Douglass C. (1986). Institutions, Economic Development and Freedom: A Historical Introduction. Canadian Cataloguing in Publication Data. 5-45.
  • Paldam, M. (1998). Does Economic Growth Lead to Political Stability?. The Political Dimension of Economic Growth. 171-190.
  • Polterovich V. and Popov, V. (2007). Democratization, Quality of Institutions and Economic Development. Transformation, Integration and Globalization Economic Research (Tiger). No:102. Warsaw.
  • Przeworski, A. and Limongi, F. (1993). 'Political Regimes and Economic Development'. The Journal of Economic Perspectives. 7(3). 51-69.
  • Rodrik, D. (2000). Participatory Politics, Social Cooperation, and Economic Stability. Political Economy, Governance, and Development. Vol. 90 No. 2, 140-144.
  • Sala-i-martin, X., Doppelhofer, G. and Miller, R. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach, American economic review, VOL. 94 NO. 4:813-835.
  • Salgado, E. (2020). Intra-party democracy index: a measure model from Brazil, Revista de Investigações Constitucionais. 7(1), 107-136.
  • Santhirasegaram, S. (2007). The Impact of Democratic and Economic Freedom on Economic Development in Developing Countries: Pooled Cross Country Data Evidence. Journal of Applied Science 7(11)1484- 1489.
  • Stroup M. (2007). Economic Freedom, Democracy, And the Quality of Life. World Dev 35(1):52–66.
  • Tavarez, J. and Wacziarg, R. (2001). How Democracy Affects Growth, European Economic Review. 45, 1341-1378.
  • Tunçsiper B., Biçen, Ö. (2014). Ekonomik Özgürlükler Ve Ekonomik Büyüme Arasındaki Ilişkinin Panel Regresyon Yöntemiyle Incelenmesi. Eskişehir Osmangazi Üniversitesi Iibf Dergisi 9(2), 25‐ 45.
  • Unit, Economist Intelligence. (2016). Democracy index 2015: Democracy in an age of anxiety.
  • Unit, Economist Intelligence. (2020). Democracy Index 2019. A year of democratic setbacks and popular protest.
  • Vega-Gordillo, M. And Alvarez-Arce, J. (2003). Economic Development and Freedom: A Causality Study. Cato J. 23. 199.
  • Wike, R., Simmons, K., Stokes, B., and Fetterolf, J. (2017). Globally, broad support for representative and direct democracy. Pew Research Center. 16.
  • Yevdokimov, Y., Melnyk, L., Lyulyov, O., Panchenko, O., and Kubatko, V. (2018). Economic freedom and democracy: Determinant factors in increasing macroeconomic stability. Problems and Perspectives in Management. 16(2), 279-290.
  • Yılmaz B. (2018). Why Has China Succeeded? Does China’s Success Contradict Acemoglu And Robınson’s Thesis in Why Nations Fail?. IPC Working Paper.
There are 54 citations in total.

Details

Primary Language English
Subjects Economics, Public Administration, Political Science
Journal Section Research Article
Authors

Mohamed Abdulkarim 0000-0001-9364-2595

Ahmet Yılmaz Ata 0000-0001-5928-8801

Publication Date March 21, 2021
Acceptance Date March 10, 2021
Published in Issue Year 2021 Volume: 8 Issue: 1

Cite

APA Abdulkarim, M., & Ata, A. Y. (2021). A Review on the Relationship Between Political Freedom and Economic Development. Equinox Journal of Economics Business and Political Studies, 8(1), 1-22. https://doi.org/10.48064/equinox.857290


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