ECONOMIC FREEDOM OF THE WORLD: AN ACCOUNTING OF THE LITERATURE.pdf

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ECONOMIC FREEDOM OF THE WORLD: AN ACCOUNTINGOF THE LITERATUREJOSHUA C. HALL and ROBERT A. LAWSONThe Economic Freedom of the World (EFW) index was first produced by Gwartney,Block, and Lawson (Economic Freedom of the World: 1975–1995; 1996) and has beenupdated annually since. During this period, the EFW index has been cited in hundredsof academic articles. Here, we provide an accounting and description of this literature.Of 402 articles citing the EFW index, 198 used the index as an independent variablein an empirical study. Over two-thirds of these studies found economic freedom tocorrespond to a “good” outcome such as faster growth, better living standards, morehappiness, etc. Less than 4% of the sample found economic freedom to be associatedwith a “bad” outcome such as increased income inequality. The balance of evidenceis overwhelming that economic freedom corresponds with a wide variety of positiveoutcomes with almost no negative tradeoffs.(JELP0, O43)I.INTRODUCTION AND HISTORICALBACKGROUNDThe Economic Freedom of the World (EFW)index was first produced by Gwartney, Block,and Lawson (1996) and has been updated annu-ally since.1The EFW index has found a placeas one of the top resources for academics, pol-icy makers, and journalists who are looking forindicators on national economic policies aroundthe world. Academically, the EFW index hasbeen cited in hundreds of articles. Many, butnot all, of these articles have a strong economicpolicy component to them and thus should beof interest to the readers of this journal. Here,we provide an accounting and description of thisliterature.The EFW index is designed to measure theconsistency of a nation’s policies and institu-tions with economic freedom. The EFW indexplaces the concept of economic freedom withinHall:Associate Professor, Department of Economics, WestVirginiaUniversity,Morgantown,WV26506-6025.Phone+1 608-313-4023, E-mail [email protected]comLawson:Jerome M. Fullinwider Chair in Economic Free-dom, O’Neil Center for Global Markets and Freedom,Cox School of Business, Southern Methodist Univer-sity, Dallas, TX 75275. Phone+1 214-768-1708, Fax+1 214-768-4099, E-mail [email protected]1. See Gwartney, Lawson, and Hall (2012) for the mostrecent report. The details of the index, the data, and itsmethodology are found both in the report itself and onlineat .the classical liberal tradition that emphasizes theimportance of private property, rule of law, freetrade, sound money, and a limited role for gov-ernment. Higher scores are accorded to nationswith more secure property, freer trade, morestable money and prices, less government spend-ing, and fewer regulations.The EFW index was conceived as a result ofa 1984 Mont Pelerin Society meeting sessionin which George Orwell’s book,1984, wasbeing discussed.

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Term
Summer
Professor
Garcia
Tags
Economics, 1984, Contemporary Economic Policy, Capitalism and Freedom, EFW Index

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