Economic Freedom on Economic Growth: A Cross Sectional Analysis

Abstract

The study, for the first time, empirically investigates the impact of economic freedom on economic growth during 2015 by adopting a modified version of the overall Index of Economic Freedom (IEF) computed by the Heritage Foundation. In this study, GDP per capita and the instruments of economic freedom are used as variables. The analysis first focused upon the indicators of economic freedom and then estimated them, because the impact of economic freedom on economic growth depends upon the measures used. The empirical result shows that business freedom, financial freedom, government integration, tax burden, and trade freedom positively influence economic growth. However, government spending, investment freedom and monetary freedom have shown a negative impact on the dependent variable. On the other hand, property rights, monetary freedom, and labor freedom do not contribute to economic growth.