Freedom, Ratings and Economic Growth: In Search of Reliable Dependencies

30 Pages Posted: 21 Mar 2013 Last revised: 19 Feb 2014

See all articles by Rinat Menyashev

Rinat Menyashev

National Research University Higher School of Economics

Konstantin Yanovskiy

Gaidar Institute for Economic Policy

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Date Written: March 20, 2013

Abstract

Ratings of institutional quality are widely known and used in academic literature. Among such ratings are some whose compilation procedure took decades to perfect. Dozens of assessments have been accumulated, pertaining to a large and growing list of countries. These ratings use expert evaluations with country ranking. However, such evaluations might be essentially incompatible with each other, and therefore inapplicable in a comparative study of one specific point in time chosen for observation (i.e., for a cross-section analysis). We propose a group of variables of our own, using evaluations of “political” institutions only to ascertain the presence or absence of a certain phenomenon (yes/no). Such a set of variables makes a cross-section analysis feasible. The countries' experience in Rule of Law Democracy and Limited Government (both are quite clearly defined in a formal manner) provides a long-term institutional development aggregate evaluation for cross-section analysis. We also propose a thoroughly simple rating based on combining the proposed variables with indices and indicators which have already become widely accepted, but taking this combination as part of a data panel. At the same time, using a panel regression makes it possible to mitigate the problem of poor compatibility of expert evaluations.

Keywords: Rule of Law Democracy, Limited Government, Institutions quality indicators, Institutions and Economic growth

JEL Classification: P50, N40, O43

Suggested Citation

Menyashev, Rinat and Yanovskiy, Konstantin, Freedom, Ratings and Economic Growth: In Search of Reliable Dependencies (March 20, 2013). Available at SSRN: https://ssrn.com/abstract=2236352 or http://dx.doi.org/10.2139/ssrn.2236352

Rinat Menyashev

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Konstantin Yanovskiy (Contact Author)

Gaidar Institute for Economic Policy ( email )

Gazetny pereulok, 3-5
Moscow, 125993
Russia

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