What is it about?
Countries have economic freedom when their citizens are free to choose, trade, and cooperate with others as they see fit as long as they do not use force, fraud, or theft and they do not violate the identical rights of others. This is a fundamental concept in institutional economics. Many studies have shown a connection between economic freedom and growth, income level, and economic development in general. However, these studies do not prove causation and can lead to inaccurate results when certain factors are not considered. This paper takes a novel approach that allows to identify the true impact of economic freedom on prosperity. The results consistently show that economic freedom has a positive and significant effect on prosperity. Robustness tests and state of the art statistical and econometric methods help ensure the accuracy of the main findings. Overall, the paper emphasizes the importance of policies and institutions in promoting economic development. The findings suggest that policy advice should focus on increasing economic freedom to foster prosperity.
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Why is it important?
This work stands out for its unique approach in identifying the true impact of economic freedom on prosperity. Unlike many previous studies that have explored the connection between economic freedom and growth, this paper employs novel methods and robustness tests to provide more accurate and reliable results. This work is timely as it underscores the significance of policies and institutions in driving economic development.
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This page is a summary of: Does economic freedom cause prosperity? An IV approach, Public Choice, August 2009, Springer Science + Business Media, DOI: 10.1007/s11127-009-9440-0.
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