How do economic freedom and culture impact economic growth? This paper argues that culture and economic institutions, specifically economic freedom, both play a role in economic development independently, but the strength of their impact can only be better understood when both are included in the growth regression. It finds that, when both are included in the growth regression, the impact of culture is greatly diminished, while economic freedom continues to have a significant impact on economic growth. The results suggest that economic freedom is more important than culture for growth outcomes, though the mechanisms through which culture affects growth warrant further investigation. The authors posit that culture may be more important for initial growth, diminishing in significance once the institutions of economic freedom have been established.
Citation (Chicago Style):
Williamson, Claudia R., and Rachel Mathers. "Economic Freedom, Culture, and Growth." Working Paper, Mercatus Center at George Mason University, 2009.