The Causal Effect of Jumps in Economic Freedom

Yasmin Valdez  | 28 de septiembre de 2018  | Vistas: 66

Kevin Grier, professor of political economy, explains the link between economic freedom and economic growth. He presents the paper that he worked with his research partner Robin Grier, to prove his perspective on this topic.

Grier starts discussing literature about economic freedom development, and why he thinks some writers are using inappropriate methods and analysis, focusing on causation rather than correlation when studying aspects of Economic Freedom of the world (EFW). Then he presents the approach of his paper in this matter, revealing what they are trying to address with this investigation.

They assume that a higher economic freedom will increase economic growth forever”.

The professor defines the change of economic freedom as a jump and describes how they are analyzing it to meet their objective of the research. He mentions the main elements in the EFW and debates three reasons of why it can increase Gross Domestic Product (GDP), but it can also be counterproductive.

Big changes can cause temporary disruptions in existing patterns of economic activity, or cause push-back from groups that were beneficiaries of the old way of doing things”.

Kevin expresses the process that he and his research partner went through to create their dataset to study the jumps in around the world. Thereupon he explains the purpose and definition of the matching methods, showing how they applied it in different cases to predict probabilities of a country increasing their economic freedom and find the ones that had the same opportunity but didn’t jump. He exposes and arguments the advantages of matching methodology.

Matching is an attempt to make the match controls look like the treated units as if they have been randomly selected even though they are not“.

Finally, he presents their main results of the causal effect of the EFW jumps on economic growth and gives his conclusions on the conference.