The Evolution of Economic Freedom and its Relationship with Economic Growth in the European Union
The Evolution of Economic Freedom and its Relationship with Economic Growth in the European Union

Summary/Abstract: Knowledge of the economic growth and development process has evolved substantially over the past five decades. The neoclassical growth model (particularly Solow’s) can‘t assist in explaining the experience of the Third World countries or to offer practical guidance for sustained economic development. Due to this reason economists focused their attention on deep determinants of economic growth, and one of them is institutional environment. This article focuses on the one aspect of institutional environment, namely economic freedom. Considering the importance of economic freedom, its change extent and continuity, this article aims to analyze the development of economic freedom in old and new European Union member states and to examine the strength of the relationship between different components of economic freedom and growth. The results revealed that the strength of the relationship between the level (or change) of different economic freedom aspects and economic growth depends on country sample and on selected variable to reflect economic growth: real GDP growth rate or real GDP per capita growth rate.

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