The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence

Doran, Colin; Stratmann, Thomas

The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence

Doran, C., & Stratmann, T. (2020). The Relationship between Economic Freedom and Poverty Rates: Cross-Country Evidence. Journal of Institutional and Theoretical Economics, 176(4), 686–707.

GMU Working Paper in Economics No. 21-27

25 Pages Posted: 27 Aug 2021 Last revised: 29 Oct 2021

See all articles by Colin Doran

Colin Doran

George Mason University - Department of Economics

Thomas Stratmann

George Mason University - Buchanan Center Political Economy; George Mason University - Mercatus Center; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 25, 2021

Abstract

We study the relationship between economic freedom and poverty rates in 151 countries over a twenty-year period. Using the World Bank’s poverty headcounts of those living on less than $1.90 per day, $3.20 per day, and $5.50 per day, we find evidence that economic freedom, measured by the Heritage Foundation’s Index of Economic Freedom, is associated with lower poverty rates. We also test the effect of various components of the Index of Economic Freedom. We find that a government’s integrity and a country’s trade freedom are associated with lower poverty rates.

Keywords: poverty, freedom, government, trade

JEL Classification: I30, P16

Suggested Citation: Suggested Citation

Doran, Colin and Stratmann, Thomas, The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence (August 25, 2021). Doran, C., & Stratmann, T. (2020). The Relationship between Economic Freedom and Poverty Rates: Cross-Country Evidence. Journal of Institutional and Theoretical Economics, 176(4), 686–707., GMU Working Paper in Economics No. 21-27, Available at SSRN: https://ssrn.com/abstract=3911478