Abstract:
Economic freedom or individual freedom in doing transaction، exchange and assets transfer، which is obtained from legal channel، have significant effects on economic growth in society with relatively efficient institutions such as property rights security and transaction cost reduction، via motivating and promoting competition. This study investigates the effect of economic freedom on economic growth with due attention to institutional economic literature and use of Lakatuch methodology. Also it recognizes the paths of the relationship between economic freedom and growth. The utilized model is the combination of Winhold dynamic model (1993) and Carlsson and Lundstrom model (2001) that study 57 countries during 2000-2006. Also in order to studying these countries exactly، it classifies countries to three categories: Low، middle and high institutional quality. The result shows positive relationship between economic freedom and growth with due attention to efficiency of exist institutions in society. Two sub-index، "property rights security and legal structure" and "laws of labor and credit market and business" of Fraser Economic Freedom whole index that have been selected as economic freedom representation، have positive and significant effect on economic growth. This confirms initial hypothesis that shows importance of institutions in each society
Machine summary:
The Effect of Economic Freedom on Economic Growth with an Institutional Approach: An Investigation by Seyyed Ali Akbar Razmi Assistant Professor, Department of Economics, Ferdowsi University of Mashhad Seyyed Mohammad Javad Razmi Assistant Professor, Department of Economics, Ferdowsi University of Mashhad 1 * Sara Shahraki PhD Student in Economics, Ferdowsi University of Mashhad Abstract Economic freedom, or in other words, the freedom of individuals in exchanging and transferring assets obtained through legal means, affects the economic growth of societies that possess relatively efficient institutions, such as property rights security and low transaction costs, which lead to increased competition.
Since Iran (according to the classification made in this article, which is also included in Table 2) ________________________________________________________________ 1 - New Institutionalism 2 - Fraser Institute 3 - Good Governance is) belongs to the group of countries with low institutional quality, the results obtained from investigating the effect of economic freedom on economic growth in this category are also generalizable to Iran, and suggestions have also been provided in this regard.
Based on the estimation results of the model for countries with low institutional quality, among the components of economic freedom, only the effect of judicial structure and security of property rights, and the effect of laws and regulations on growth, are positive and significant.
The effect of economic freedom indicators, namely government size, sound money, and freedom of foreign exchange, on the economic growth of countries with low institutional quality is positive but not significant.
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