Economic Freedom and Growth: The Case of the Celtic Tiger

Ireland had low rates of economic growth prior to the 1990s and then it achieved rapid rates of economic growth, converging and passing Europe’s per capita income level. This working paper traces the

Ireland had low rates of economic growth prior to the 1990s and then it achieved rapid rates of economic growth, converging and passing Europe’s per capita income level. This working paper traces the policies of the Irish government from the 1950s to present and relates these policies to the degree of economic freedom in Ireland. We find that as economic freedom increased, Ireland grew more rapidly. Specifically, the reforms made following Ireland’s fiscal crisis in the mid 80s, that slashed the government’s role in the economy, changed the institutional environment that entrepreneurs operate in. The government made credible commitments not to inflate or run large budget deficits, while continuing to cut tax rates following the initial reforms. Powell shows that the "Celtic Tiger’s" growth was achieved by reducing the government’s involvement in the economy and freeing private entrepreneurs and investors to pursue their own self-interest.

To speak with a scholar or learn more on this topic, visit our contact page.

Mercatus AI Assistant
Ask questions about this research.
GPT Logo
Mercatus AI Research Assistant
Ask questions about this research. Mercatus Chatbot AI More Details
Suggested Prompts:
Ask us anything. We use OpenAI's ChatGPT 4o base model to answer any question about Mercatus research.