REGULATION ,I NVESTMENT, AND GROWTH ACROSS COUNTRIES

Abstract

Numerous studies have explored the relationship between economic freedom and longrun economic growth across countries. See, for example, the studies cited in the recent review by Berggren (2003). One particular aspect of economic freedom that has received relatively little attention in the empirical growth literature, however, is the extent of government regulation. Determining the impact of regulation on cross-country economic performance has been virtually impossible because of the inherent difficulties in measuring the scope of regulation across countries. While a few studies investigate various aspects of specific regulations, none are able to assess the importance of a comprehensive measure of regulation on long-run economic performance in a large sample of countries. 1 Fortunately, the recent availability of data on the scope of regulation across countries now makes such a study possible. Recent releases of the Fraser Institute’s Economic Freedom of the World annual report include data on the regulatory environment in a large number of countries. Beginning with the 2002 release, the report’s economic freedom of the world (EFW)