Economic Freedom and Economic Performance in Latin America: A Panel Data Analysis

Abstract This paper performs panel regressions of output per worker, capital intensity, human capital, and total factor productivity in L atin A merica on measures of economic freedom in five policy areas. Results show that a smaller government raises output per worker in L atin A merica but not in the OECD . Stronger property rights and a tighter monetary policy also raise output per worker, but greater freedom to trade internationally does not, despite doing so in the OECD . Deregulation lowers output per worker in both L atin A merica and the OECD . Finally, a tighter monetary policy raises total factor productivity ( TFP ) but reduces capital intensity in L atin A merica, while deregulation raises capital intensity but lowers TFP in both sets of countries.