Who Benefits when a Country Becomes More Economically Free? (Does Anybody Lose?)

51 Pages Posted: 19 Apr 2022

See all articles by Justin T Callais

Justin T Callais

Texas Tech University, College of Agricultural Sciences and Natural Resources, Department of Agricultural and Applied Economics, Students; University of Louisiana at Lafayette - Department of Economics and Finance

Andrew T. Young

Texas Tech University - Rawls College of Business

Date Written: April 13, 2022

Abstract

We explore the relationship between economic freedom and inequality. We employ the Fraser Institute’s Economic Freedom of the World (EFW) index and country-level (i) decile income shares, (ii) decile income levels, and (iii) Gini coefficients. We address concerns for endogeneity and nonlinearity using matching methods. We report that economic freedom is a tide that raises boats at all income levels. We also report that increases in economic freedom cause increases in income inequality. While those increases are associated with gains in the top income decile, they are modest. We conclude that increased economic freedom leads to significant gains across the income distribution.

Keywords: economic freedom, income deciles, inequality, matching methods, causal inference, institutional economics

JEL Classification: D63, P00, P16, P48

Suggested Citation

Callais, Justin and Young, Andrew T., Who Benefits when a Country Becomes More Economically Free? (Does Anybody Lose?) (April 13, 2022). Free Market Institute Research Paper No. 4083350, Available at SSRN: https://ssrn.com/abstract=4083350 or http://dx.doi.org/10.2139/ssrn.4083350

Justin Callais

Texas Tech University, College of Agricultural Sciences and Natural Resources, Department of Agricultural and Applied Economics, Students ( email )

Box 42132
Lubbock, TX 79409-2132
United States

University of Louisiana at Lafayette - Department of Economics and Finance ( email )

Lafayette, LA 70504
United States

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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