Edited by Richard J. Cebula, Joshua Hall, Franklin G. Mixon Jr and James E. Payne
Chapter 8: Economic freedom convergence clubs
AbstractIn this chapter, institutional quality, as proxied by the Heritage Index of Economic Freedom, is tested for sigma convergence and divergence across a sample of 97 countries covering the period 1995–2014. Divergence of the overall index value is found to be occurring, indicating governmental institutions and policies are becoming more dissimilar on the whole around the world. Testing each component separately, however, reveals that freedoms related to property rights, business, investment, and financial are globally diverging whereas freedoms related to corruption, fiscal, government, monetary, and trade are converging. Dividing the sample into five distinct regions, it is also found that countries within the Europe and Middle East/North Africa regions are converging for overall economic freedom. This suggests that European countries are adopting institutional structures and policies more similar to each other, as are MENA nations. In other words, European and MENA nations are forming an institutional convergence club.
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