Economic Freedom and Equality: Friends or Foes?
1999 (English)In: Public Choice, ISSN 0048-5829, E-ISSN 1573-7101, Vol. 100, no 3/4, 203-223Article in journal (Refereed) Published
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.
Economic freedom, Equality, Economic growth.
National CategoryEconomics and Business
IdentifiersURN: urn:nbn:se:hhs:diva-1074DOI: 10.1023/A:1018343912743ISI: 000081852500003OAI: oai:DiVA.org:hhs-1074DiVA: diva2:357713
även publicerad i SSRN2010-10-192010-10-192014-12-10Bibliographically approved