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Economic Freedom And Endogenous Economic Growth

Year 2021, Volume 8, Issue 2, 265 - 296, 30.07.2021
https://doi.org/10.30626/tesamakademi.958750

Abstract

The relation between economic freedoms and economic performance is very crucial to determine economic growth and to the development policies of a country. Economic development and growth are the ultimate goal for all developed and emerging economies. Economic developed countries have been aiming to sustain their current situation, while developing countries apply policies that will provide economic growth and development. Convergence hypothesis which is the one of the main inference of Solow growth model states that, in a close economy, real income difference across countries tends to decrease because of the diminishing rate of return of capital. The concept of "economic freedoms" is one of the driving elements of economic growth and development. This study tests empirically economical freedom foster macroeconomic growth in an endogenous growth model. Panel data is used in covering 159 countries for the period of 1995-2014 via nonlinear least square methods. Findings suggest that there is significant relation between economical freedom and per capita growth. JEL Classification: E2, O43, O47, D02, E10

References

  • Abramowitz, M. (1986). Catching up, forging ahead, and falling behind. Journal of Economic History, 46(2), 385-406.
  • Acar, M. (2010). Serbest ticaret, ekonomik özgürlükler ve refah. Ahmet Yesevi Üniversitesi, Bilig Türk Dünyası Sosyal Bilimler Dergisi, 53, 56.
  • Ashby, N. J., Sobel, R. S. (2008). Income inequality and economic freedom in the U.S. States. Public Choice, 134 (3-4), 329-346.
  • Ateş, S. (1996). Ekonomik büyümeye yaklaşımlar ve yakınsama sorunu. Çukurova Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 6(1), 79-103.
  • Ayal, E. B., Karras, G. (1998). Components of economic freedom and growth: an empirical study. Journal of Developing Areas, 32(3), 327-338.
  • Azman-Saini, W. N. W., Baharumshah, A. Z., Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling, 27(5), 1079-1089.
  • Barro, R.J. (1991). Economic growth in a cross section of countries. Quarterly Journal of Economics, 106(2), 407-443.
  • Barro, R.J., Sala-i-Martin, X.X. (1992). Convergence. Journal of Political Economy, 100(2), 223- 251.
  • Barro, R. J. (1994). Democracy & growth (No. w4909). National Bureau of Economic Research.
  • Barro, R. J., and Sala-i-Martin, X. (1995). Economic growth McGraw-Hill. New York.
  • Barro, R. J. (1999). Inequality, growth, and investment (No. w7038). National bureau of economic research.
  • Barro, R. J. (2001). Human capital and growth. The American Economic Review, 91(2), 12-17.
  • Bates, D.M., Watts, D.G., (1988). Nonlinear regression analysis and its applications, (Vol. 2). Wiley, New York
  • Baumol, W.J. (1986). Productivity growth, convergence and welfare: What the long run data show? The American Economic Review, 76(5). 1072-86.
  • Beach, W. W., Miles, M. A. (2006). Explaining the factors of the index of economic freedom. 2006 Index of Economic Freedom, 55-76.
  • Bengoa, M., Sanchez-Robles, B. (2003). Foreign direct investment, economic freedom and growth: New evidence from Latin America. European Journal of Political Economy, 19(3). 529-545.
  • Berggren, N. (1999). Economic freedom and equality: Friends or Foes?. Public Choice, 100(3-4). 203-223.
  • Bernard, A. B.,Durlauf, S. N. (1995). Convergence in international output. Journal of Applied Econometrics, 10(2). 97-108.
  • Borucu, A. C. (2017). Three essays on economic growth:Financial innovation, human capital and foreign direct invetstment, (Yayımlanmamış doktora tezi, Yeditepe Üniversitesi Sosyal Bilimler Enstitüsü, Finansal İktisat Ana Bilim Dalı, İstanbul.)
  • Carlsson, F., Lundström, S. (2001). Economic freedom and growth: Decomposing the effects. Public Choice, 112(3-4), 335-344.
  • Dawson, J. W. (1998). Institutions, investment and growth: New cross-coumtry and panel data evidence. Economic Inquiry, 36, 603-319.
  • Dawson, J. W. (2006). Regulation, investment, and growth a cross countries. Cato J., 26, 489.
  • Doucouliagos, C., Ulubasoglu, M. (2004). Economic freedom and economic growth: selection, specification and genuine effects. In European Public Choice Society meetings, Berlin.
  • Evans, P., Karras, G. (1996). Convergence revisited. Journal of Monetary Economics, 37(2). 249-265.
  • Fraser Institute, (2020), Economic freedom of the world 2020 annual report, fraser institute (Vancouver, B.C.)
  • Friedman, M. (2002). Economic freedom behind the scenes. Economic Freedom of the World Report: 2002 Annual Report. Cato Institute.
  • Gounder, R. (2002). Political and economic freedom, fiscal policy and growth nexus: Some empirical results for Fiji. Contemporary Economic Policy, 20(3), 234-245.
  • Galor, O. (1996). Convergence? Inferences from theoretical models. The Economic Journal, 1056-1069.
  • Gwartney, J., Lawson, R., and Block, W. (1996). Economic freedom of the world, 1975-1995 vancouver. BC Canada: the Fraser Institute.
  • Gwartney, J., Lawson, R. (2002). Economic freedom of the world: 2002 Annual Report. Washington, DC. Cato Institute.
  • Gwartney, J., Holcombe, R. G., Lawson, R. A. (2004). Economic freedom, institutional quality and cross-country differences in income and growth. Cato Journal, 24(3), 205-233.
  • Heckelman, J. C., Knack, S. (2009). Aid, economic freedom and growth. Contemporary Economic Policy, 27(1), 46-53.
  • Henry, P. B. (2003). Capital-account liberalization, the cost of capital, and economic growth. American Economic Review, 93(2), 91-96.
  • Islam, N. (2003). What have we learnt from the convergence debate?. Journal of economic surveys, 17(3), 309-362.
  • Jones, C. I. (1995). R and D-based models of economic growth. Journal of political Economy, 103(4), 759-784.
  • Jones, C. (1998). Introduction to economic growth. New York: W. W. Norton and Company Inc.
  • Justesen, M. K. (2008). The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970-1999. European Journal of Political Economy, 24(3), 642-660.
  • Kaldor, N. (1961). Capital accumulation and economic growth. In The theory of capital (pp. 177-222). Palgrave Macmillan, London.
  • Karpavicius, S., Ulusoy, V., Yalcin, E. (2014). Transitional Dynamics of Scale and Scope on Growth Revisited.
  • Lau, K. N., Lam, P. Y. (2002). Economic freedom ranking of 161 countries in year 2000: A minimum disagreement approach. Journal of the Operational Research Society, 53(6), 664-671.
  • Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of monetary economics, 22(1), 3-42.
  • Luintel, K. B., Khan, M. (1999). A Quantative Reassessment of the finance-growth nexus: Evidence from a multivariate VAR. Journal of Development Economics, 60(2), 381-405.
  • Mahmood, K., Azid, T. (2011). Economic freedom verses economic growth: Cross countries analysis in the form of ARDL approach. Asian Economic and Financial Review, 1(1), 14-25.
  • Mankiw, N. G., Romer, D., and Weil, D. N. (1992). A contribution to the empirics of economic growth. The quarterly journal of economics, 107(2), 407-437.
  • Nelson, M. A., and Singh, R. D. (1998). Democracy, economic freedom, fiscal policy, and growth in LDCs: a fresh look. Economic Development and Cultural Change, 46(4), 677-696.
  • Orend, B. (2006). Justifying socio-economic rights. Economic rights in Canada and the United States, 25-40.
  • Panahi, H., Assadzadeh, A., and Refaei, R. (2014). Economic freedom and economic growth in mena countries. Asian Economic and Financial Review, 4(1), 105.
  • Patry, W. (2009). Moral panics and the copyright wars. New York: Oxford University.
  • Rebelo, S. (1991). Long-run policy analysis and long-run growth. Journal of political Economy, 99(3), 500-521.
  • Romer, P.M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.
  • Romer, D. (1996). Advanced macroeconomics. New York: McGrawHill
  • Sala-i-Martin, X. X. (1996). The classical approach to convergence analysis. The Economic Journal, 106(437), p. 1020.
  • Sala-i-Martin, X. (2002). 15 years of new growth economics: What have we learnt? Central Bank of Chile, Working Papers, No: 172
  • Sameti, M., Shahchera, M. (2006). Economic freedom, economic growth and governments tax revenue in (MENA). Iranian Economic Review, 11(17), 67-86.
  • Schumpeter, J. A. (1911). The Theory of economic development. USA: Harvard University.
  • Scully, G. W. (2002). Economic freedom, government policy and the trade-off between equity and economic growth. Public Choice, 113(1-2), 77-96.
  • Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94
  • Srinivasan, T. N. (1999). Trade orientation, trade liberalization, and economic growth. Gary Saxonhouse and TN Srinivasan, Development, Duality, and the International Economic Regime: Essays in Honor of Gustav Ranis, Ann Arbor, The University of Michigan.
  • Ulusoy, V. (2001). Trade and convergence: A dynamic panel data approach. Southern Economic Journal, 133-144.
  • Ulusoy, V., Yalcin, E. (2011). Convergence of productivity levels among the EU countries: Evidence from a panel of industries. Australian Economic Papers, 50(2‐3), 98-114.
  • Valdés, B. (1999). Economic growth: theory, empirics and policy. Edward Elgar Publishing.
  • Weede, E. (2006). Economic freedom and development: New calculations and interpretations. Cato J., 26, 511.

Ekonomik Özgürlük ve İçsel Ekonomik Büyüme

Year 2021, Volume 8, Issue 2, 265 - 296, 30.07.2021
https://doi.org/10.30626/tesamakademi.958750

Abstract

Ekonomik özgürlükler ile ekonomik performans arasındaki ilişki, bir ülkenin ekonomik büyüme ve kalkınma politikalarının belirlenmesinde çok önemlidir. Ekonomik kalkınma ve büyüme, tüm gelişmiş ve yükselen ekonomiler için nihai hedeftir. Ekonomik olarak gelişmiş ülkeler mevcut durumlarını sürdürmeyi hedeflerken, gelişmekte olan ülkeler ise ekonomik büyüme ve kalkınmayı sağlayacak politikalar uygulamaktadır. Solow büyüme modelinin temel çıkarımlarından biri olan yakınsama hipotezi, kapalı bir ekonomide ülkeler arasındaki reel gelir farkının, azalan sermaye getiri oranı nedeniyle azalma eğiliminde olduğunu belirtmektedir. "Ekonomik özgürlükler" kavramı, büyüme ve kalkınmanın itici unsurlarından biridir. Bu çalışma, içsel bir büyüme modelinde ampirik olarak ekonomik özgürlüğün makroekonomik büyümeyi desteklediğini test etmektedir. Panel veri doğrusal olmayan en küçük kareler yönteminde gauss newton algoritması (iteratif simülasyon) kullanılarak 1995-2014 dönemi için 159 ülke verisi analiz edilmiştir. Bulgular, ekonomik özgürlük ile kişi başına büyüme arasında anlamlı bir ilişki olduğunu göstermektedir. JEL Sınıflaması: E2, O43, O47, D02, E10

References

  • Abramowitz, M. (1986). Catching up, forging ahead, and falling behind. Journal of Economic History, 46(2), 385-406.
  • Acar, M. (2010). Serbest ticaret, ekonomik özgürlükler ve refah. Ahmet Yesevi Üniversitesi, Bilig Türk Dünyası Sosyal Bilimler Dergisi, 53, 56.
  • Ashby, N. J., Sobel, R. S. (2008). Income inequality and economic freedom in the U.S. States. Public Choice, 134 (3-4), 329-346.
  • Ateş, S. (1996). Ekonomik büyümeye yaklaşımlar ve yakınsama sorunu. Çukurova Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 6(1), 79-103.
  • Ayal, E. B., Karras, G. (1998). Components of economic freedom and growth: an empirical study. Journal of Developing Areas, 32(3), 327-338.
  • Azman-Saini, W. N. W., Baharumshah, A. Z., Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling, 27(5), 1079-1089.
  • Barro, R.J. (1991). Economic growth in a cross section of countries. Quarterly Journal of Economics, 106(2), 407-443.
  • Barro, R.J., Sala-i-Martin, X.X. (1992). Convergence. Journal of Political Economy, 100(2), 223- 251.
  • Barro, R. J. (1994). Democracy & growth (No. w4909). National Bureau of Economic Research.
  • Barro, R. J., and Sala-i-Martin, X. (1995). Economic growth McGraw-Hill. New York.
  • Barro, R. J. (1999). Inequality, growth, and investment (No. w7038). National bureau of economic research.
  • Barro, R. J. (2001). Human capital and growth. The American Economic Review, 91(2), 12-17.
  • Bates, D.M., Watts, D.G., (1988). Nonlinear regression analysis and its applications, (Vol. 2). Wiley, New York
  • Baumol, W.J. (1986). Productivity growth, convergence and welfare: What the long run data show? The American Economic Review, 76(5). 1072-86.
  • Beach, W. W., Miles, M. A. (2006). Explaining the factors of the index of economic freedom. 2006 Index of Economic Freedom, 55-76.
  • Bengoa, M., Sanchez-Robles, B. (2003). Foreign direct investment, economic freedom and growth: New evidence from Latin America. European Journal of Political Economy, 19(3). 529-545.
  • Berggren, N. (1999). Economic freedom and equality: Friends or Foes?. Public Choice, 100(3-4). 203-223.
  • Bernard, A. B.,Durlauf, S. N. (1995). Convergence in international output. Journal of Applied Econometrics, 10(2). 97-108.
  • Borucu, A. C. (2017). Three essays on economic growth:Financial innovation, human capital and foreign direct invetstment, (Yayımlanmamış doktora tezi, Yeditepe Üniversitesi Sosyal Bilimler Enstitüsü, Finansal İktisat Ana Bilim Dalı, İstanbul.)
  • Carlsson, F., Lundström, S. (2001). Economic freedom and growth: Decomposing the effects. Public Choice, 112(3-4), 335-344.
  • Dawson, J. W. (1998). Institutions, investment and growth: New cross-coumtry and panel data evidence. Economic Inquiry, 36, 603-319.
  • Dawson, J. W. (2006). Regulation, investment, and growth a cross countries. Cato J., 26, 489.
  • Doucouliagos, C., Ulubasoglu, M. (2004). Economic freedom and economic growth: selection, specification and genuine effects. In European Public Choice Society meetings, Berlin.
  • Evans, P., Karras, G. (1996). Convergence revisited. Journal of Monetary Economics, 37(2). 249-265.
  • Fraser Institute, (2020), Economic freedom of the world 2020 annual report, fraser institute (Vancouver, B.C.)
  • Friedman, M. (2002). Economic freedom behind the scenes. Economic Freedom of the World Report: 2002 Annual Report. Cato Institute.
  • Gounder, R. (2002). Political and economic freedom, fiscal policy and growth nexus: Some empirical results for Fiji. Contemporary Economic Policy, 20(3), 234-245.
  • Galor, O. (1996). Convergence? Inferences from theoretical models. The Economic Journal, 1056-1069.
  • Gwartney, J., Lawson, R., and Block, W. (1996). Economic freedom of the world, 1975-1995 vancouver. BC Canada: the Fraser Institute.
  • Gwartney, J., Lawson, R. (2002). Economic freedom of the world: 2002 Annual Report. Washington, DC. Cato Institute.
  • Gwartney, J., Holcombe, R. G., Lawson, R. A. (2004). Economic freedom, institutional quality and cross-country differences in income and growth. Cato Journal, 24(3), 205-233.
  • Heckelman, J. C., Knack, S. (2009). Aid, economic freedom and growth. Contemporary Economic Policy, 27(1), 46-53.
  • Henry, P. B. (2003). Capital-account liberalization, the cost of capital, and economic growth. American Economic Review, 93(2), 91-96.
  • Islam, N. (2003). What have we learnt from the convergence debate?. Journal of economic surveys, 17(3), 309-362.
  • Jones, C. I. (1995). R and D-based models of economic growth. Journal of political Economy, 103(4), 759-784.
  • Jones, C. (1998). Introduction to economic growth. New York: W. W. Norton and Company Inc.
  • Justesen, M. K. (2008). The effect of economic freedom on growth revisited: New evidence on causality from a panel of countries 1970-1999. European Journal of Political Economy, 24(3), 642-660.
  • Kaldor, N. (1961). Capital accumulation and economic growth. In The theory of capital (pp. 177-222). Palgrave Macmillan, London.
  • Karpavicius, S., Ulusoy, V., Yalcin, E. (2014). Transitional Dynamics of Scale and Scope on Growth Revisited.
  • Lau, K. N., Lam, P. Y. (2002). Economic freedom ranking of 161 countries in year 2000: A minimum disagreement approach. Journal of the Operational Research Society, 53(6), 664-671.
  • Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of monetary economics, 22(1), 3-42.
  • Luintel, K. B., Khan, M. (1999). A Quantative Reassessment of the finance-growth nexus: Evidence from a multivariate VAR. Journal of Development Economics, 60(2), 381-405.
  • Mahmood, K., Azid, T. (2011). Economic freedom verses economic growth: Cross countries analysis in the form of ARDL approach. Asian Economic and Financial Review, 1(1), 14-25.
  • Mankiw, N. G., Romer, D., and Weil, D. N. (1992). A contribution to the empirics of economic growth. The quarterly journal of economics, 107(2), 407-437.
  • Nelson, M. A., and Singh, R. D. (1998). Democracy, economic freedom, fiscal policy, and growth in LDCs: a fresh look. Economic Development and Cultural Change, 46(4), 677-696.
  • Orend, B. (2006). Justifying socio-economic rights. Economic rights in Canada and the United States, 25-40.
  • Panahi, H., Assadzadeh, A., and Refaei, R. (2014). Economic freedom and economic growth in mena countries. Asian Economic and Financial Review, 4(1), 105.
  • Patry, W. (2009). Moral panics and the copyright wars. New York: Oxford University.
  • Rebelo, S. (1991). Long-run policy analysis and long-run growth. Journal of political Economy, 99(3), 500-521.
  • Romer, P.M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.
  • Romer, D. (1996). Advanced macroeconomics. New York: McGrawHill
  • Sala-i-Martin, X. X. (1996). The classical approach to convergence analysis. The Economic Journal, 106(437), p. 1020.
  • Sala-i-Martin, X. (2002). 15 years of new growth economics: What have we learnt? Central Bank of Chile, Working Papers, No: 172
  • Sameti, M., Shahchera, M. (2006). Economic freedom, economic growth and governments tax revenue in (MENA). Iranian Economic Review, 11(17), 67-86.
  • Schumpeter, J. A. (1911). The Theory of economic development. USA: Harvard University.
  • Scully, G. W. (2002). Economic freedom, government policy and the trade-off between equity and economic growth. Public Choice, 113(1-2), 77-96.
  • Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94
  • Srinivasan, T. N. (1999). Trade orientation, trade liberalization, and economic growth. Gary Saxonhouse and TN Srinivasan, Development, Duality, and the International Economic Regime: Essays in Honor of Gustav Ranis, Ann Arbor, The University of Michigan.
  • Ulusoy, V. (2001). Trade and convergence: A dynamic panel data approach. Southern Economic Journal, 133-144.
  • Ulusoy, V., Yalcin, E. (2011). Convergence of productivity levels among the EU countries: Evidence from a panel of industries. Australian Economic Papers, 50(2‐3), 98-114.
  • Valdés, B. (1999). Economic growth: theory, empirics and policy. Edward Elgar Publishing.
  • Weede, E. (2006). Economic freedom and development: New calculations and interpretations. Cato J., 26, 511.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Cumhur TAŞ This is me (Primary Author)
Yeditepe Üniversitesi,Sosyal Bilimler Fakültesi
0000-0003-2583-5744
Türkiye


Veysel ULUSOY This is me
Yeditepe Üniversitesi, Sosyal Bilimler Fakültesi
0000-0001-7227-894X
Türkiye

Publication Date July 30, 2021
Published in Issue Year 2021, Volume 8, Issue 2

Cite

Bibtex @research article { tesamakademi958750, journal = {TESAM Akademi Dergisi}, issn = {2148-2462}, eissn = {2458-9217}, address = {}, publisher = {TESAM Ekonomik Siyasal ve Stratejik Araştırmalar Merkezi Derneği}, year = {2021}, volume = {8}, pages = {265 - 296}, doi = {10.30626/tesamakademi.958750}, title = {Economic Freedom And Endogenous Economic Growth}, key = {cite}, author = {Taş, Cumhur and Ulusoy, Veysel} }
APA Taş, C. & Ulusoy, V. (2021). Economic Freedom And Endogenous Economic Growth . TESAM Akademi Dergisi , 8 (2) , 265-296 . DOI: 10.30626/tesamakademi.958750
MLA Taş, C. , Ulusoy, V. "Economic Freedom And Endogenous Economic Growth" . TESAM Akademi Dergisi 8 (2021 ): 265-296 <https://dergipark.org.tr/en/pub/tesamakademi/issue/64331/958750>
Chicago Taş, C. , Ulusoy, V. "Economic Freedom And Endogenous Economic Growth". TESAM Akademi Dergisi 8 (2021 ): 265-296
RIS TY - JOUR T1 - Economic Freedom And Endogenous Economic Growth AU - Cumhur Taş , Veysel Ulusoy Y1 - 2021 PY - 2021 N1 - doi: 10.30626/tesamakademi.958750 DO - 10.30626/tesamakademi.958750 T2 - TESAM Akademi Dergisi JF - Journal JO - JOR SP - 265 EP - 296 VL - 8 IS - 2 SN - 2148-2462-2458-9217 M3 - doi: 10.30626/tesamakademi.958750 UR - https://doi.org/10.30626/tesamakademi.958750 Y2 - 2021 ER -
EndNote %0 Journal of TESAM Akademy Economic Freedom And Endogenous Economic Growth %A Cumhur Taş , Veysel Ulusoy %T Economic Freedom And Endogenous Economic Growth %D 2021 %J TESAM Akademi Dergisi %P 2148-2462-2458-9217 %V 8 %N 2 %R doi: 10.30626/tesamakademi.958750 %U 10.30626/tesamakademi.958750
ISNAD Taş, Cumhur , Ulusoy, Veysel . "Economic Freedom And Endogenous Economic Growth". TESAM Akademi Dergisi 8 / 2 (July 2021): 265-296 . https://doi.org/10.30626/tesamakademi.958750
AMA Taş C. , Ulusoy V. Economic Freedom And Endogenous Economic Growth. TESAM Akademi Dergisi. 2021; 8(2): 265-296.
Vancouver Taş C. , Ulusoy V. Economic Freedom And Endogenous Economic Growth. TESAM Akademi Dergisi. 2021; 8(2): 265-296.
IEEE C. Taş and V. Ulusoy , "Economic Freedom And Endogenous Economic Growth", TESAM Akademi Dergisi, vol. 8, no. 2, pp. 265-296, Jul. 2021, doi:10.30626/tesamakademi.958750