Economic Freedom of The World - Research

Research

Hundreds of peer-reviewed articles have used the index and has been used in economic research, political science, and environmental research.

Economic freedom has been shown to correlate strongly with higher average income per person, higher income of the poorest 10%, higher life expectancy, higher literacy, lower infant mortality, higher access to water sources and less corruption. The share of income in percent going to the poorest 10% is the same for both more and less economically free countries.

The people living in the top one-fifth of the most free countries enjoy an average income of $23,450 and a growth rate in the 1990s of 2.56 percent per year; in contrast, the bottom one-fifth in the rankings had an average income of just $2,556 and a -0.85 percent growth rate in the 1990s. The poorest 10 percent of the population have an average income of just $728 in the least free countries compared with over $7,000 in the most free countries. The life expectancy of people living in the most free nations is 20 years longer than for people in the least free countries.

Higher economic freedom, as measured by both the Heritage and the Fraser indices, correlates strongly with higher self-reported happiness and is significant in preventing wars. Economic freedom is around 54 times more effective than democracy (as measured by Democracy Score) in diminishing violent conflict.

Regarding environmental health, studies have found no or a positive effect. More important may be the Kuznets curve. Most environmental health indicators, such as water and air pollution show an inverted U-shape. Meaning in the beginning of economic development, little weight is given to environmental concerns, raising pollution along with industrialization. After a threshold, when basic physical needs are met and a middle class is established, interest in a clean environment rises, reversing the trend.

Studies show that more economic freedom is the cause of beneficial effects and that Economic Freedom of the World was used for most of the research, partly because Index of Economic Freedom only goes back to 1995 and because it uses more subjective variables.

In 2011, a study in the IMF Economic Review found that countries with higher economic freedom and more liberal credit market regulation suffered more during the late-2000s financial crisis and global recession.

Read more about this topic:  Economic Freedom Of The World

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