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Geography and Economic Freedom

Geography and Economic Freedom. Matthew E. Brown. Economic Freedom. How is it measured? Size of Government: Expenditures, Taxes, and Enterprises Legal Structure and Security of Property Rights Access to Sound Money Freedom to Exchange with Foreigners

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Geography and Economic Freedom

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  1. Geography and Economic Freedom Matthew E. Brown

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

  3. Economic Freedom and Income

  4. Economic Freedom and Growth

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

  6. R² - .000 Coefficient - -7E09 P-Value – .869 Observations - 128 Source: CIA World Factbook

  7. R² - .090 Coefficient - -1.2E06 P-Value – .002 Observations - 108 Source: CIA World Factbook

  8. R² - .002 Coefficient - -3E10 P-Value – .626 Observations - 129 Source: World Bank Human Development Index

  9. Which Other Geographic Factors Matter? Source: Diamond, Jared M. “Peeling the Chinese Onion.” Nature Vol. 391, pp. 433-434. January 29, 1998.

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

  11. Exitability • (Total Boundaries/Total Area) • Theory

  12. R² - .103 Coefficient - 3.688 P-Value – .000 Observations - 128 R² - .055 Coefficient - -2E08 P-Value – .015 Observations - 107 Source: CIA World Factbook

  13. Coastalness • (Coastline/Total Area) • Theory

  14. R² - .094 Coefficient - 3.523 P-Value – .000 Observations - 128

  15. R² - .112 Coefficient - 3.346 P-Value – .000 Observations - 105

  16. R² - .167 Coefficient - 18.343 P-Value – .052 Observations - 23 Source: CIA World Factbook

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

  18. Source: CIA World Factbook

  19. Source: CIA World Factbook

  20. Source: CIA World Factbook

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

  22. Conclusion • Geography affects Economic Freedom • Economic Freedom affects Growth

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