The Short-Run Consequences of Economic Freedom Erosion on Growth and Institutions in Latin America: An Unorthodox Experimental Review for the XXI Century

Abstract

Between 2000 and 2019 Latin American governments have increased and decreased economic freedom in a continuous cycle. Combining differences in the erosion of economic freedom with differences in economic growth and a set of institutional variables, for a sample of 19 Latin American countries, results suggest that for each percentage point that a country erodes economic freedom, the following year, its economic growth rate is between 0.3 to 1.6 percentage points lower, and suffers a worsening of institutions such as democracy, corruption, transparent laws, censorship effort media, and judicial constraints in comparison with countries that did not erode it.

Keywords: economic freedom, economic growth, institutions, Latin American

JEL Classification: O43; E020; O54