The Long-Run Effect of Government Ideology on Economic Freedom

Abstract

Do right-wing or left-wing governments impact economic freedom over time? While rightwing governments often profess an affinity for free markets, intellectual proponents of free markets frequently downplay the importance of the identity of politicians for political outcomes, or question the sincerity of right-wing politicians. This paper uses a cross-sectional measure of the political ideology of the executive and dominant legislative party, by country, for the period 1928-1995 (from Botero et al. 2004) to investigate this question. A modest, positive effect is found for rightwing governments for economic freedom as of 1995, but this effect dissipates by 2015. The effects found are not found to be robust across specifications, although this may be owing to the limitations of the data.

Keywords: Economic Freedom, Economic Institutions, Political Ideology

JEL Classification: D72, O43