The Role of Business Environment and Economic Freedom on Economic Growth in Selected Countries by Using Panel Data during 2004-2013

اقتصاد و توسعه منطقه ای

Article 6, Volume 21, Issue 8, February 2015   

Document Type: مقالات پژوهشی

DOI: 10.22067/erd.v21i8.43931

Authors

Roohollah Babaki^* ; Mostafa Salimifar

Abstract

Abstract
Production is a process by which a productive activity will require some conditions (before and after the start of the production). One of the most important pre-required factors for start up a production unit is suitable Business Environment. One of the most important factors that must be provided after the start of production -During the production process and the time to market and export- is economic freedom.
Hence, this paper explores the impact of Business Environment and economic freedom on economic growth in 30 selected countries during 2004-2013. Panel data estimation results indicate that Business Environment and economic freedom have positive and significant relationship with economic growth.
Our findings show that the impact of economic freedom on economic growth is greater than the Business Environment.

Keywords: Business Environment, Economic Freedom, Economic Growth, Panel Data

JEL Classification: C23, K20, O41, O50

Keywords

business environment; Economic Freedom; Economic Growth; Panel Data

References

references

1- Abdollahi, F., Mehrabani, F., & Basirat, M. (2013). Comparison of indicators of doing business and economic growth: A case study of Iran and member states of the Organization for Economic Cooperation and Development (OECD), 1st National E- Conference on Future perspective of Iranian Economy (national production supporting approach). Islamic Azad University (Khorasgan Brabnch). Isfahan. Iran. available at: conference.khuisf.ac.ir (In persian).

2- Baltagi, B. (1995). Econometric analysis of panel data, Wiley.

3- Barro, R.J & Martin,X. (1995). Economic Growth. New York: McGraw-Hill, Inc.

4- Bigsten, A, P. Collier, S. Dercon, M. Fafchamps, B. Gauthier, J.W. Gunning, J. Habarurema, A. Oduro, R. Oostendorp, C. Pattillo, M. Söderbom, F. Teal and A. Zeufack. (2000). Exports and firm-level efficiency in African manufacturing, CSAE Working Paper 2000/16, Oxford University, available at: http://econpapers.repec.org/paper/fthetcomo/2000-04.htm

5- Borensztein, E., Gregorio, J. W. & De Lee. (1998). How does Foreign Direct Investment Affect Economic Growth?. Journal of International Economics, Vol. 45, pp.115-135.

6- Colin Xu, L. (2011). The Effects of Business Environments on Development: Surveying New Firm-level Evidence. The World Bank Research Observer. vol. 26, no. 2, pp. 310-340, available at: http://wbro.oxfordjournals.org/content/26/2/310.full.pdf+html

7- Daman Keshideh, M., Khoda Bakhsh Zadeh, S. (2012). Investigate the effect of business regulations and FDI on economic growth in the countries of G77, Quarterly Journal of Economics, Vol. 6, No. 21, pp. 109-81. (In persian).

8- Djankov, S., McLiesh C., Ramalho R. M. (2006). Regulation and growth, Economics Letters, Elsevier, Vol.92 (3), pp. 395–401.

9- Edwards, S. (1992). Trade Orientation, Distortions and Growth in Developing Countruse. journal od Development Economics, Vol. 391, pp. 31-57.

10- Farhadi, (2004), Effects of foreign trade and economic growth of Iran, The journal of planning and budjeting, Vol. 9 (1), pp. 27-58. (In persian).

11- Fatʼhi, A. R. (2013). Improving the doing business to attract foreign investment, Economic Journal (Journal of Evaluation of Economic Issues and Policy), Vol 13, No. 3 and 4, pp: 5-20. (In persian).

12- Gillanders, R. & Whelan, K. (2010). Open For Business? Institutions, Business Environment and Economic Development, working paper, University College Dublin, available at: www.karlwhelan.com/Papers/gillanderswhelan.pdf

13- Haidar, Jamal Ibrahim. (2012). The impact of business regulatory reforms on economic growth, Journal of The Japanese and International Economies, Elsevier, vol. 26(3), pp. 285-307.

14- Hosseinzade Bahreini, M. H., Falahi, M. A., Erfany Jahanshahi, F. (2012). The Effect of Business Regulations on Economic Growth (A Selection of Developed and Developing Countries). Journal of Economy and Regional Development. Vol. 19, No. 3, pp. 101-121. (In persian).

15- Hozarmoghadam, N. & Abdoli, Gh. (2013), The effects of trade liberalization on productivity in the manufacturing sector, Quarterly Journal of Economic Strategy, vol. 2 (4), pp. 7-38. (In persian).

16- Jalal Abadi, A. & Bahrami, J. (2010). Determinants of economic growth in different groups (a new approach to the determinants of economic growth), Quantitative Economics (Former Economic Reviews). Vol. 7, No. 1, pp. 51-23. (In persian).

17- Johnson, B. T., Holmes, K. R., Kirkpatrick, M. (1999). The 1999 Index of Economic Freedom: Executive Summary, The Heritage Foundation Wall Street Journal.

18- Karimi Tekanlu, Z., Sadeghi, S. K., & Sattari, M. (2013). Study of factors affecting doing business in Iran (With an emphasis on public investment). The first international conference on sustainable development with approach to improve the doing business. Mashhad. Iran. available at: www.civilica.com. (In persian).

19- Mahdavi, A. (2004). Analysis of the role of foreign investment in economic growth, Economic Research Journal, Vol. 39, No. 3 (serial number. 66), pp. 181-208. (In persian).

20- Mankiw, N. G., Romer, D., Weil, D. N. (1992). The Quarterly Journal of Economics, Vol. 107, No. 2. (May), pp. 407-437.

21- Mehrabian, A.; Sedghi Sigarchi, N. (2010). The effect of population growth on economic growth in the four income groups over the years (1985-2007), Quarterly Journal of Economics, Vol. 5, No. 13, pp. 97-114. (In persian).

22- Naji Meydani, A. A. (2003). Effects of economic globalization on growth, employment and income distribution in Iran. Economic Thesis (PhD), Tarbiat Modarres University, Faculty of Humanities, Department of Economics. Tehran. Iran. (In persian).

23- Paytakhti Oskooe S. A., Tabagchi Akbari L. (2012). Applying of panel data in econometric modelling of energy section. The First International Conference on Econometrics. Islamic Azad University (Sanandaj Brabnch). Kordestan. Iran. pp. 1-22. available at: www.civilica.com. (In persian).

24- Pourmiri, M. (2012). Calculating the contribution of labor and physical capital, human resources and research and development in the economic growth of Iran (1974- 2007). First regional conference on research and new approaches in accounting and management. Shafagh non-profit institution of higher education, Tonkabon, Mazandaran, Iran. available at: www.civilica.com. (In persian).

25- Pourshahabi, F., Mahmoudiani, D. & E. Salimi Soderjani. (2011). FDI, Human Capital, Economic Freedom and Growth in OECD Countries, Research Journal of Internatıonal Studies, No. 19, pp. 71-81.

26- Razmi, A. A., Razmi, M. J., Shahraki, S. (2009). The Effect of Economic Freedom on Economic growth with Institutional Approach (Causal Investigation). Journal of Science and Development, Vol. 16, No. 28, pp. 157-127. (In persian).

27- Shahnazi, R. (2006). The effect of economic freedom on per capita income and economic growth (the approach of Panel Data), Journal of Humanities and Social Sciences, Vol. 6, No. 20, pp: 84-59. (In persian).

28- Shahnazi, R. & Dehghani Shabani, Z. (2011). examining the impact of the doing business and economic growth in selected countries, Economic Journal, Vol. 11, No. 3, pp: 161-185. (In persian).

29- Solow, R. M. (1956). A contribution to the theory of Economic Growth, Quarterly Jurnal of Economics, LXX, pp. 65-94.

30- Solow, R. M. (1957). The Review of Economics and Statistics, Vol. 39, No. 3, pp. 312-320.

31- Tayebi, S. K. (2013). The need for government support of small enterprises and medium enterprises to improve the doing business, the magazine of the Chamber of Commerce, Industry, Mines and Agriculture, Isfahan, Vol 64, No. 64 and 65, pp. 16-13. (In persian).

32- Tayebi S. K., Haji Karami M., Sariri H. (2011). The Effect of Financial and Trade Openness on Financial Development: Evidence from Iran and its trade Partners (1996-2009). Quarterly Journal of Economic Development Research. Vol. 1, No. 4, pp. 39-60. (In persian).

33- Tayebi S. K., Pourshahabi F., KhaniZadeh Amiri M., Kazemi E. (2013). The Effects of the Foreign Direct Investment and Openness on the Domestic Investment and Economic Growth: Case Study of 10 Asian Developing Countries. Quarterly Journal of Economic Reaserch and Policies Vol. 21, No. 67, pp. 131-152. (In persian).

34- The Heritage Foundation. (2014). Highlights of the 2014 index of Economic Freedom, Promoting Economic Opportunity and Prosperity. available at: www.Heritage.org and http://thf_media.s3.amazonaws.com/2014/pdf/Index2014_Highlights.pdf

35- The Heritage Foundation. (2014). Methodology for the 10 Economic Freedom, available at: www.Heritage.org

36- Van Den Berg, H. (2012). Economic Growth and Development. MC Graw Hill, World Scientific Publishing Company; 2 edition.

37- World Bank’s World Development Indicators (WDI), available at: www.WorldBank.org

38- World Bank Doing Business Database, available at: http://www.doingbusiness.org

39- World Bank, Doing Business Report. (2014). Understanding Regulations for Small and Medium-Size Enterprises, Comparing Business Regulations for Domestic Firms in 189 Economies, available at: http://www.doingbusiness.org

40- ZarraNezhad, M. & Anvari, E. (2005). Reviews of Panel Data, Application in Econometrics. Journal of Quantitative Economics (Former Economic Reviews). Vol. 2, No. 4, pp. 21-52. (In persian).