associated with smaller shadow economies and lower perceptions of corruption (as measured by Transparency International), as fewer regulations, taxes, and tariffs reduce the opportunities for corruption available to public officials.

Notwithstanding the strong theoretical underpinnings and empirical evidence of the virtue of economic freedom,<sup>11</sup> a number of authors have questioned the causal relationship between economic freedom and economic growth, suggesting that it may have more to do with the tendency of rapidly growing economies to liberalize economically and politically than economic freedom per se causing growth. De Haan and Siermann (1998) find that the positive effect of economic freedom on economic growth is not robust, but depends on the indicator of economic freedom used. De Haan and Sturm (2000) conclude that while greater economic freedom will lead a country more rapidly to a steady state of economic growth, the level of this steady state of growth itself is unaffected by the degree of economic freedom. In a further analysis, de Haan, Leerouwer, and Sturm (2002) maintain that the various, largely ad hoc indices of economic freedom are not robustly related to economic growth.

Yet, overall economic scholars tend to support the notion of an overall positive causal relationship between economic freedom and economic growth.<sup>12</sup> In a survey of 33 empirical studies on the relationship between economic freedom and economic growth, de Haan, Lundström and Sturm (2006) conclude that, notwithstanding the various shortcomings of empirical studies using the EFW index, market-oriented institutions and policies are strongly related to economic growth. They found strong indications that liberalization, i.e. an increase in the EFW index, stimulates economic growth. Barro (1997) provides empirical evidence supporting the idea that free markets and maintenance of property rights foster economic growth. Gwartney and Lawson (2004) found that increases in economic freedom, as measured by the EFW index, led to more growth in the future (changes in economic freedom during the 1980s were associated with higher rates of economic growth during the 1990s), but higher growth rates did not improve future EFW ratings. However, they note that the EFW does not suggest that countries moving from the least free EFW quintile to the most free will rapidly achieve a GDP per capita similar to those countries in the most free grouping. Instead, the relationship between current economic freedom ratings and GDP per capita indicates that institutional change typically occurs _gradually_ . In other words, economic freedom would be key to economic development but is no quick fix. In a more elaborated empirical testing of the causal relationships among economic freedom, democracy, and growth,<sup>13</sup> both Farr, Lord, and Wolfenbarger (1998) and Vega-Gordillo and Alvarez (2003) found that economic freedom fosters economic growth but that there is no statistically significant causality running from growth to economic freedom. This conclusion is corroborated by a number of econometric studies 11 An extreme example is the comparative performance of market-oriented West Germany and highly-regulated East Germany, or the current relative performance of South Korea and North Korea. Less dramatic differences on the impact of economic freedom can be found on all continents among both developed and developing countries. 12 This is not to say that all components of economic freedom are necessarily associated with economic growth. While some components of economic freedom are usually found to cause economic growth (e.g., the use of markets and property rights), other components may be caused by growth, and still others jointly determined with growth. Berggren (2003) provides a survey of the empirical findings in this area.

13 To determine what causal relationships exist among economic freedom, political freedom, and economic growth, the authors use a dynamic model and define causality along the lines established by Granger (1969).

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