Description:
Reviewing the economic performance --
good and bad -- of more than 100 countries over the past 30
years, this paper finds new empirical evidence supporting
the idea that economic freedom and civil and political
liberties are the root causes of why some countries achieve
and sustain better economic outcomes. For instance, a one
unit change in the initial level of economic freedom between
two countries (on a scale of 1 to 10) is associated with an
almost 1 percentage point differential in their average
long-run economic growth rates. In the case of civil and
political liberties, the long-term effect is also positive
and significant with a differential of 0.3 percentage point.
In addition to the initial conditions, the expansion of
freedom conditions over time (economic, civil, and
political) also positively influences long-run economic
growth. In contrast, no evidence was found that the initial
level of entitlement rights or their change over time had
any significant effects on long-term per capita income,
except for a negative effect in some specifications of the
model. These results tend to support earlier findings that
beyond core functions of government responsibility --
including the protection of liberty itself -- the expansion
of the state to provide for various entitlements, including
so-called economic, social, and cultural rights, may not
make people richer in the long run and may even make them poorer.