Does Economic Freedom Foster Tolerance?

53 Pages Posted: 26 Apr 2012  

Niclas Berggren

Research Institute of Industrial Economics (IFN)

Therese Nilsson

Research Institute of Industrial Economics (IFN); Lund University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 24, 2012

Abstract

Tolerance has the potential to affect both economic growth and wellbeing. It is therefore important to discern its determinants. We add to the literature by investigating whether the degree to which economic institutions and policies are market-oriented is related to different measures of tolerance. Regression analysis of up to 65 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affected by how free markets are. Stable monetary policy and outcomes is the area of economic freedom most consistently associated with greater tolerance, but the quality of the legal system seems to matter as well. We furthermore find indications of a causal relationship and of social trust playing a role as a mechanism in the relationship between economic freedom and tolerance and as an important catalyst: the more trust in society, the more positive the effect of economic freedom on tolerance.

Keywords: Markets, Economic freedom, Tolerance, Government, Institutions, Inflation, Property rights, Regulation

JEL Classification: P10, P48, Z13

Suggested Citation

Berggren, Niclas and Nilsson, Therese, Does Economic Freedom Foster Tolerance? (April 24, 2012). IFN Working Paper No. 918. Available at SSRN: https://ssrn.com/abstract=2045577 or http://dx.doi.org/10.2139/ssrn.2045577

Niclas Berggren (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/nb

Therese Nilsson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden
+46 46 222 46 43 (Phone)

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