The Effects of Economic Freedom, Regulatory Quality, and Taxation on the Level of Per Capita Real Income: a Preliminary Analysis for OECD Nations and Non-G8 OECD Nations

Posted: 14 Mar 2016

See all articles by J. R. Clark

J. R. Clark

The University of Tennessee at Chattanooga

Richard J. Cebula

Armstrong Atlantic State University; Jacksonville University (Florida)

Date Written: March 10, 2016

Abstract

This study of the impact of economic freedom, regulatory quality, and the relative burden of taxation on the level of per capita real income/GDP among OECD nations over the 2003-2007 period adopts a modified version of the overall economic freedom index computed by The Heritage Foundation (2013), one with the fiscal freedom and business freedom indices removed. This study then provides PLS fixed effects estimates for five linear specifications/models. Each nation during this time frame can be regarded either as a nation per se or as a de facto “economic region” within the OECD. The analysis first focuses upon all of the OECD nations and then, as a robustness test, subsequently focuses only on non-G8 OECD member nations. The estimations in this study all provide strong empirical support for the three central hypotheses proffered here, namely: (1) the higher the overall degree of economic freedom; the higher the per capita real income (GDP) level; (2) the higher the level of regulatory quality, the higher the level of per capita real income (GDP); and (3) the higher the overall tax burden, expressed as a percent of GDP, the lower is the level of per capita real income (GDP).

Suggested Citation

Clark, Jeff R. and Cebula, Richard J., The Effects of Economic Freedom, Regulatory Quality, and Taxation on the Level of Per Capita Real Income: a Preliminary Analysis for OECD Nations and Non-G8 OECD Nations (March 10, 2016). Applied Economics, Vol. 46, No. 31, 2014. Available at SSRN: https://ssrn.com/abstract=2746020

Jeff R. Clark (Contact Author)

The University of Tennessee at Chattanooga ( email )

Department of Economics
Suite 313 Fletcher Hall
Chattanooga, TN 37403-2598
United States

Richard J. Cebula

Armstrong Atlantic State University ( email )

11935 Abercorn Street
Savannah, GA 31419
912-921-3781 (Phone)
912-921-3782 (Fax)

Jacksonville University (Florida) ( email )

Jacksonville, FL 32211
United States

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