THE ROLE OF ECONOMIC FREEDOMS IN ECONOMIC GROWTH

Year 2022, Volume: 20 Issue: 3, 59 - 74, 08.10.2022

Ayfer Özyılmaz

Abstract

In this study, the effect of economic freedom sub-indices on economic growth in 155 countries was analyzed using 2021 data. For coefficient estimation, cross-section Quantile Regression and Ordinary Least Squares Regression (OLS) methods were used. Both model findings generally support each other. According to the OLS method, trade freedom, financial freedom, business freedom and government integrity affect economic growth positively, and according to the quantile regression method, these variables positively affect growth in all quantiles; On the other hand, public expenditures affect economic growth negatively according to all models. Investment freedom and labor freedom are statistically insignificant on growth according to both OLS and quantile regression. Monetary freedom has a positive effect on economic growth according to OLS, but it has a positive effect on economic growth in all quantiles except the 80th quantile in quantile regression. According to the OLS findings, fiscal Health has a positive effect on economic growth, and according to the quantile regression method, it has a positive effect on growth in the 40th, 60th and 80th quantiles except the 20th quantile. Property rights positively affects economic growth in OLS, but according to quantile regression, this variable affects economic growth positively in 20th, 40th and 60th quantiles. Tax freedom is statistically insignificant according to the OLS. Similarly, according to quantile regression, tax freedom is statistically insignificant in all quantiles except the 60th quantile. Judicial effectiveness is statistically insignificant on growth according to the OLS. According to the quantile regression, it is statistically insignificant in the 20th and 80th quantiles, but negatively affects the economic growth in the 40th and 60th quantiles. When the analysis findings are evaluated in general, it can be said that economic freedoms mostly affect economic growth positively.

Keywords

Economic freedom, Economic growth, Quantile regression

References

• Bashir, M. F, Xu, C. (2014). Impact of political freedom, economic freedom and political stability on economic growth. Journal of Economics and Sustainable Development, 5(22), 59-67.
• 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.
• Birol, Y. E, & Demirgil, B. (2020). Ekonomik özgürlükler ve ekonomik büyüme ilişkisi: BRICS ülkeleri üzerine ampirik bir çalışma. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 13(3), 546-558.
• Buchinsky, M. (1998). Recent advences in quantile regression models: a practical guideline for empirical research. Journal of Human Resources, 88-126. Bundă, N. R, Moise-Ţiţei, A, Jaliu, D. D. (2012). A new institutional approach of the complex correlation between economic freedom and economic growth. European Journal of Science and Theology, 8(1), 75-84.