Market-Oriented Institutions and Policies and Economic Growth: A Critical Survey

36 Pages Posted: 8 May 2006  

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Susanna Lundström

The World Bank

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

This paper surveys recent evidence suggesting that market-oriented institutions and policies are strongly related to economic growth, focusing on studies using the economic freedom (EF) indicator of the Fraser Institute. This index is critically discussed. Also various serious shortcomings of empirical studies using this index are identified. Nevertheless, there are strong indications that liberalization, i.e. an increase in the EF index, stimulates economic growth. This paper also reviews studies on the determinants of EF. Political liberalization is often found to enhance economic liberalization, whereas there is less evidence for causality running in the other direction.

Suggested Citation

de Haan, Jakob and Lundström, Susanna and Sturm, Jan-Egbert, Market-Oriented Institutions and Policies and Economic Growth: A Critical Survey. Journal of Economic Surveys, Vol. 20, No. 2, pp. 157-191, April 2006. Available at SSRN: https://ssrn.com/abstract=893327 or http://dx.doi.org/10.1111/j.0950-0804.2006.00278.x

Jakob de Haan (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Susanna Lundstrom Gable

The World Bank ( email )

Sweden

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

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