Freedom, policy stability, and economic growth among nations

This dissertation is an empirical investigation of the effect of political systems and institutions on economic growth. These factors include political regimes, economic freedom, political stability, stable economic policies, and the quality of institutions. Although these factors have been discussed in considerable length in the growth literature, this dissertation adds a new dimension into the current debate. Contrary to the current literature on growth that stresses the nature of political regimes and the stability of political systems, this dissertation stresses economic freedom and the stability of economic policies as more essential elements that determine the difference of economic performance across countries.;Most of the studies investigating the determinants of growth fail to incorporate the importance of economic freedom, the quality of institutions and the stability of economic policies into their empirical analysis. This dissertation seeks to fill this gap. Furthermore, one of the empirical anomalies in the current literature of growth is the use of poorly-constructed and arbitrarily-aggregated indices to test the relationship between these indices and economic growth. When one study uses it, successive studies follow suit and use the same indices without reservation, and perpetuating the weaknesses of the first study. The use of wrong indices suggests wrong implications and renders inappropriate policy conclusions. This dissertation seeks to remedy at least some of these shortcomings.;The dissertation is organized as follows. Chapter two is a literature review. Chapter three investigates the importance of political systems on economic growth. It provides ample evidence that economic freedom is more important than political freedom or civil liberty in explaining growth differences across countries. Chapter 3 explores the effect of institutions on growth and investment. It identifies those institutional variables that are desirable in the context of economic growth yet neglected by the current literature on growth. Chapter 4 analyzes the causes and the consequences of corruption and then proceeds to an empirical examination of the determinants of corruption across countries.;Chapter 5 elaborates the effect of political stability on economic growth, using a novel approach. Unlike the literature that emphasizes the turnover of decision-makers, this chapter focuses on the volatility of economic policies as the relevant indicator of stability. The literature on growth ignores the micro-economic instability associated with frequent changes of economic policies.