Joint Impact of the Dimensions of Governance and Economic Freedom on Economic Growth in O.E.C.D. Nations: An Analysis with Controls for Budget Deficits and G8 Status

Abstract

This study examines the impact of various forms of economic freedom and various dimensions of governance, as well as a number of economic factors, on economic growth among O.E.C.D. nations. The study period runs from 2004 through 2007. The study adjusts for status as a G8 nation and for budget deficits. Panel least squares estimation finds that the natural log of per capita purchasing-power-parity adjusted real GDP in O.E.C.D. nations is positively impacted by business freedom, monetary freedom, trade freedom, and property rights security. Economic growth is found to be negatively affected by perceived government corruption while being positively impacted by both control of corruption and political stability. Other findings indicate that higher unemployment rates and higher long term nominal interest rates inhibit economic growth, while net export growth enhances economic growth.