HUMAN FREEDOM AND ECONOMIC DEVELOPMENT: A GRANGER CAUSALITY ANALYSIS OF PANEL DATA
Date Issued
2021-10-15
Author(s)
DOI
UDK 342.72/.73:[338.121:303.725.3
Abstract
Vigorous empirical research has been done recently about the immense impact
of institutions on economic prosperity. Numerous studies have provided
valuable evidence that market-supportive institutions, which limit the power
of the state and promote individual choice, self-ownership, rule of law and
voluntary exchange, have a positive impact on economic development. Here,
we would like to introduce and examine one relatively new measurement of
the institutional environment – the human freedom index and its link to
economic prosperity. Human freedom is an indexed co-published between the
Cato Institute and the Fraser Institute. It presents the state of human freedom
in the world by uniting the aspects of personal and economic freedoms. In the
paper, we examine the relationship between human freedom and economic
development using the Granger causality test of panel data. The general idea
is to analyze if there is a causal relationship between human freedom and
economic growth and to determine the direction of the relationship.
Additionally, we examine the causality between these two variables among the
different regions around the world. The results of the study can serve as an
indication of whether supporting human freedom can accelerate economic
growth.
of institutions on economic prosperity. Numerous studies have provided
valuable evidence that market-supportive institutions, which limit the power
of the state and promote individual choice, self-ownership, rule of law and
voluntary exchange, have a positive impact on economic development. Here,
we would like to introduce and examine one relatively new measurement of
the institutional environment – the human freedom index and its link to
economic prosperity. Human freedom is an indexed co-published between the
Cato Institute and the Fraser Institute. It presents the state of human freedom
in the world by uniting the aspects of personal and economic freedoms. In the
paper, we examine the relationship between human freedom and economic
development using the Granger causality test of panel data. The general idea
is to analyze if there is a causal relationship between human freedom and
economic growth and to determine the direction of the relationship.
Additionally, we examine the causality between these two variables among the
different regions around the world. The results of the study can serve as an
indication of whether supporting human freedom can accelerate economic
growth.
Subjects
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