Economic Freedom and Economic Growth: Case of Taiwan and Emerging Market Economies
Date Issued
2016
Date
2016
Author(s)
Chen, Tzu-Hua
Abstract
This study investigates the relationship between economic freedom and economic growth in Taiwan and 40 emerging market economies during 2005-2014. 4 models are used to do the analysis: which dimensions of economic freedom have significant positive or negative impact on economic growth, whether overall economic freedom is good for economic growth, whether economic freedom impact economic growth differently because of different region and income level. The index of economic freedom computed by The Heritage Foundation and The Wall Street Journal is employed to do the panel data regression. The categorization of region and income level depend on the criterion of The World Bank, the income level of a country might vary over time. After the estimation of pooled regression, fixed-effect, random-effect with STATA, test results indicate that all 4 models are suitable for fixed-effect model. The result shows that among ten economic freedom dimensions, Government Spending (positive), Labor Freedom (positive), Monetary Freedom (positive), Trade Freedom (negative), Financial Freedom (positive) have statistically significant effect on economic growth while Freedom from Corruption (negative), Fiscal Freedom (negative), Business Freedom (negative), Investment Freedom (negative) are insignificant variables. Property Right is excluded because of high correlation with Freedom from Corruption. Overall Economic Freedom has positive and significant impact on growth. Comparing with other region, the positive impact in Latin America & the Caribbean is the biggest. The positive effect for every one more economic freedom point on growth in high-income economies is bigger than in other emerging market economies.
Subjects
Economic Freedom
Economic Growth
Emerging Market
Panel Data
Fixed-Effect Model
Type
thesis
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