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Economic Freedom and Equality: Friends or Foes?
Stockholm School of Economics, Economics (S).
1999 (English)In: Public Choice, ISSN 0048-5829, E-ISSN 1573-7101, Vol. 100, no 3/4, 203-223 p.Article in journal (Refereed) Published
Abstract [en]

How does economic freedom, mainly how property rights are designed and protected, relate to equality, in the fornt of the distribution of income? Theoretically, it is argued that changes in equality are determined by changes in the tax-and-transfer system and by differential growth rates of income for different groups (such as rich and poor). Economic freedom affects the income development and is also related to changes in redistribution policies. Whether rich or poor are able to gain the most from (more) economic freedom is theoretically unclear and needs to be investigated empirically. The empirical results (both descriptive data and regressions) reveal that there is a positive relationship between changes in economic freedom and equality: the more a country increased its economic freedom between 1975 and 1985, the higher the level of equality around 1985. Also, there are some signs that the level of economic freedom in 1985 is negatively related to the level of equality around that year, plausibly because of less redistribution. However, the inclusive evidence points in a rather clear direction: that continual increases in economic freedom over time render an average country more equal, due to the relatively strong growth rates of the gross income of the poor in a freer economic environment.


Place, publisher, year, edition, pages
Springer , 1999. Vol. 100, no 3/4, 203-223 p.
Keyword [en]
Economic freedom, Equality, Economic growth.
National Category
Economics and Business
URN: urn:nbn:se:hhs:diva-1074DOI: 10.1023/A:1018343912743ISI: 000081852500003OAI: diva2:357713

även publicerad i SSRN

Available from: 2010-10-19 Created: 2010-10-19 Last updated: 2014-12-10Bibliographically approved
In thesis
1. Essays in constitutional economics
Open this publication in new window or tab >>Essays in constitutional economics
1997 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Essays in Constitutional Economics uses the theoretical tools developed in public choice and constitutional economics to analyze how institutions of various sorts influence the individual choice calculus. Institutions are seen as formal and informal rules that can be evaluated and, although oftentimes durable, reformed. The primary purpose of institutions is to guide and constrain human behavior in a world characterized by uncertainty and self-interested motives, such that human actions are more conducive to long-term, aggregate preference satisfaction.

The first essay, "Social Order through Constitutional Choice: A Contractarian Proposal," introduces a normative criterion for legitimate constitutional change, based in James Buchanan’s brand of contractarianism, and proceeds to outline a specific constitutional proposal. The proposed constitution consists of a common core, representing Nozick’s minimal state, and a set of subconstitutions between which citizens can choose, irrespective of geographic location, and which encompass different scopes of government.

The second essay, "Rhetoric or Reality? An Economic Analysis of the Effects of Religion in Sweden," views religious beliefs, themselves taken as given, as entailing moral positions, here seen as informal institutions, which influence behavior in a predictable fashion. An empirical study of divorce rates, rates of children born out of wedlock, abortion rates, and rates of not paying one’s debts in Swedish municipalities reveal that the stronger the religious involvement, the less of these particular behaviors is seen. Interestingly, the negative influence of involvement in the Lutheran state church is greater, on the margin, than the negative influence stemming from involvement in (generally more conservative) independent churches.

The third essay, "Economic Freedom and Equality: Friends or Foes?" looks at economic policies as sets of variable institutions which influence economic activities, and thereby efficiency and the income distribution, in various ways. A cross-country study reveals that economic freedom, defined in the form of an index measuring such things as tax pressure, protection of property rights, a functioning judicial system, low inflation, and freedom to trade, can be positively related to income equality. This holds in developing countries when economic freedom is increased over a longer time period in a stable manner and when the increase is the result of trade and capital-flow liberalization. Then, the poor seem to be able to take advantage of the freer economy to a larger extent than those who are better off.

Place, publisher, year, edition, pages
Stockholm: Economic Research Institute, Stockholm School of Economics [Ekonomiska forskningsinstitutet vid Handelshögsk.] (EFI), 1997
Public choice, Teorin om kollektiva val
National Category
urn:nbn:se:hhs:diva-865 (URN)91-7258-440-8 (ISBN)
Public defence
1997-03-18, Sal Ruben, Handelshögskolan, Saltmätargatan 13-17, Stockholm, 13:15 (English)
Diss. Stockholm : Handelshögsk.Available from: 2009-06-05 Created: 2009-06-05 Last updated: 2011-05-31Bibliographically approved

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