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Economic freedom, investment and growth

Economic freedom, investment and growth. GRA 5917: Public Opinion and Input Politics Term Paper Proposal Alexandru Sarbu. Purpose. To study the impact of capital investment and economic freedom on economic growth, with focus on Sub-Saharan Africa. Theory.

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Economic freedom, investment and growth

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  1. Economic freedom, investment and growth GRA 5917: Public Opinion and Input Politics Term Paper Proposal Alexandru Sarbu

  2. Purpose To study the impact of capital investment and economic freedom on economic growth, with focus on Sub-Saharan Africa.

  3. Theory Economic freedom leads to economic growth (Edwards; de Haan and Sturm; Tupy; Weede) Investment leads to economic growth (Dawson; Gelb, Ramachandran and Turner)

  4. Question To what extent?

  5. Kimlong Chheng Economic freedom, domestic investment rate, and FDI have arobust association with percapita GDP growth in all the 50 countries overthe period. All types of capitalinvestment interact positively and closelywith economic freedom to generategrowth-enhancing externalities. To attain growth, it requires investment andfavorable economic freedom, fostered by government policies and institutions. Government share or public expenditure is negativelycorrelated withgrowth. The phenomenon can be expectedlypredicted if the excessive expendituregoes to unproductive sectors. The initial per capita GDP in logarithms isnegatively correlated with subsequent growth rate.

  6. Kimlong Chheng Growth=α0 + β1LogGDPIi + β2EFi + β3IGDPi + +β4PubEGDPi + β5DmLDCs + +β6DmDeveloping + β7(EF*IGDP) + +β8FDIGDP + εi

  7. Model Growth=α0 + β1EFi + β2IGDPi+ β3DmLDCs + β4DmDeveloping+ + β5(EF*IGDP) + εi Drop LogGDP and PubEGDP Merge IGDP and FDIGDP (New dataset doesn’t differentiate)

  8. Data Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.3 Fraser Institute 2009

  9. Discussion Will dropping the initial real per capita GDP inlogarithms at each starting period of the five-year intervals and the real government expenditure to real GDP ratio alter the result? Are the dummies necessary? (Some countries have changed status)

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