Plausibly Exogenous Causes of Economic Freedom

Abstract

A large literature has emerged investigating the origins of the institutions of economic freedom. While some literature has used impressive identification strategies in tackling this question, findings from the literature are typically circumscribed in their identification. This paper considers a series of variables that are reasonably thought of as exogenous, namely, legal origins and a series of environmental variables. It then compares their effects on economic freedom to the lagged relationships of education, democracy, and civil society with economic freedom. The historical prevalence of pathogens at first appears to be a strong determinant of economic freedom, but it is tentatively concluded that this occurs through the conduit of education, with lagged education having a strongly positive relationship with economic freedom. We also find that the natural log of the size of a country has a negative effect on economic freedom. We separately observe several other tertiary or less robust results in the course of the analysis found herein.

Keywords: Institutions, Economic Freedom, Environment, Legal Origins, Parasite-Stress Theory, Education

JEL Classification: Q56, P10, K00, O43