Economic Freedom and Economic Crisis

32 Pages Posted: 26 Nov 2014 Last revised: 24 Jan 2015

See all articles by Christian Bjørnskov

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Date Written: January 23, 2015

Abstract

In this paper, I explore the politically contested association between the degree of capitalism, captured by measures of economic freedom, and the risk and characteristics of economic crisis. After offering some brief theoretical considerations, I estimate the effects of economic freedom on crisis risk in the post-Cold War period 1993-2010. I further estimate the effects on the duration, peak-to-trough GDP ratios and recovery times of 212 crises across 175 countries within this period. Estimates suggest that economic freedom is robustly associated with smaller peak-to-trough ratios and shorter recovery time. These effects are driven by regulatory components of the economic freedom index.

Keywords: Crisis, economic freedom, institutions

JEL Classification: O11, O43, P16

Suggested Citation

Bjørnskov, Christian, Economic Freedom and Economic Crisis (January 23, 2015). IFN Working Paper No. 1056. Available at SSRN: https://ssrn.com/abstract=2530928 or http://dx.doi.org/10.2139/ssrn.2530928

Christian Bjørnskov (Contact Author)

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

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

Center for Political Studies

Landgreven 3
Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
119
Abstract Views
1,355
rank
238,641
PlumX Metrics