The Nexus between Economic Freedom and Economic Growth in Arab Countries

Abstract

The purpose of this study is to explore the relationship between economic freedom and economic growth in Arab countries. Specifically, we seek to verify the hypothesis that greater economic freedom increases real gross domestic product per capita and to identify, consequently, the components of economic freedom that contribute to economic growth in Arab countries. We use panel data of 14 Arab countries from 2002 to 2019. The ordinary least squares estimation results confirm the hypothesis that greater economic freedom is associated with greater economic growth. The results also suggest that only four of the 10 economic components outlined in the Index of Economic Freedom have a significant effect on real gross domestic product per capita: trade freedom, government integrity, property rights, and tax burden. Reform in these areas, which are often neglected by neoclassical growth models, is essential to enhance economic growth and improve the standard of living in Arab countries.