Geography and Economic Freedom Matthew E. Brown

Economic Freedom How is it measured? 1.Size of Government: Expenditures, Taxes, and Enterprises 2.Legal Structure and Security of Property Rights 3.Access to Sound Money 4.Freedom to Exchange with Foreigners 5.Regulation of Credit, Labor, and Business

Economic Freedom and Income

Economic Freedom and Growth

Does Size Matter? Why would it? –Theory Alesina, Bauer Size Measures –Land Area –Population

R² Coefficient - -7E09 P-Value –.869 Observations Source: CIA World Factbook

R² Coefficient E06 P-Value –.002 Observations - 108

Source: World Bank Human Development Index R² Coefficient - -3E10 P-Value –.626 Observations - 129

Which Other Geographic Factors Matter? Source: Diamond, Jared M. “Peeling the Chinese Onion.” Nature Vol. 391, pp January 29, 1998.

Other Geographic Variables Exitability (Total Boundaries/Total Area) Coastalness (Coastline/Total Area) Latitude (Control Variable)

Exitability (Total Boundaries/Total Area) Theory

R² Coefficient - -2E08 P-Value –.015 Observations R² Coefficient P-Value –.000 Observations Source: CIA World Factbook

Coastalness (Coastline/Total Area) Theory

R² Coefficient P-Value –.000 Observations - 128

R² Coefficient P-Value –.000 Observations - 105

Source: CIA World Factbook R² Coefficient P-Value –.052 Observations - 23

How does geography affect EFW sub-sectors? Sub-sectors 1.Size of Government: Expenditures, Taxes, and Enterprises 2.Legal Structure and Security of Property Rights 3.Access to Sound Money 4.Freedom to Exchange with Foreigners 5.Regulation of Credit, Labor, and Business

Source: CIA World Factbook

Relative Importance of Geographic Factors Multiple Regression –Land Area –Population –Exitability –Shape Factor –Percentage of Arable Land –Latitude

Conclusion Geography affects Economic Freedom Economic Freedom affects Growth