Economic Freedom and Divergence
A just-concluded conference in honor of Milton and Rose Friedman produced some interesting papers. For example, James D. Gwartney and Robert A. Lawson find that an index of economic freedom helps to account for the failure of the standard of living of underdeveloped countries to converge toward that of developed countries.
when the consistency of a nation’s institutions and policies with economic freedom is held constant, lower income countries grow faster than higher income countries, providing empirical support for models that predict convergence.
For Discussion. Is there an issue of possible reverse causality at work–that countries with more economic development are in a better position to maintain institutions that are consistent with economic freedom?