The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries

Abstract

The EU Green Deal and its impact on economic transformation provoked a slightly forgotten free market vs. market regulation discussion, but in the light of a new context—economic and environmental performance development. The economic shock caused by COVID-19, which transformed economies and societies, intensified this discussion. This article analyses the impact of economic freedom on economic performance and environmental performance in European countries. The article contributes to a gap in the literature, because, to date, research has examined the effects of economic freedom, or some of its components, on economic or environmental measures in groups of nations with a lacking sustainable development context. In addition, the mixed results obtained led to confusion in perceptions and knowledge about the influence and usefulness of economic freedom for economic and environmental performance. We also found mixed results regarding the influence of economic freedom on economic and environmental performance, but the introduction of a new concept—the optimal level of economic freedom—organized the different results into a coherent logical sequence. The paper provides original empirical evidence and specifies the targets of structural reforms. The results are thus useful for policymakers to develop more appropriate and efficient economic freedom.

Evaluating green innovation and performance of financial development: mediating concerns of environmental regulation

“…China's economic growth has accelerated in recent decades, despite the country's high pollution and emissions levels. It has achieved tremendous economic growth, surpassing the USA as the world's second largest economy, but this growth is contingent on resource inputs, which generate significant pollution (Rapsikevicius et al 2021). The extent of haze in China has sparked international and domestic concern about China's resource and environmental problems.…”

Economic Freedom, Education and CO2 Emissions: A Causality Analysis for EU Member States

“…The differences in country-level causality analysis can result from country-specific characteristics such as current economic development level and economic structures. In the related limited empirical literature, Rapsikevicius et al [39] have reached mixed findings on the interaction between economic freedom indicators and environmental performance indicators for 23 European economies. On the other hand, Odugbesan et al [14] discovered a positive effect of economic freedom on carbon productivity for Turkey.…”

“…The limited empirical literature on the nexus between economic freedom and the environment has generally utilized the regression approach and found mixed findings. Odugbesan et al [14], Cheon et al [34], Adesina and Mwamba [35], Bjørnskov [36], and Jain and Kaur [37] discovered a negative influence of economic freedom indicators on CO 2 emissions, but Wood and Herzog [38], Rapsikevicius et al [39], Chen [24], and Alola et al [40] have revealed mixed findings on the influence of economic freedom indicators on CO 2 emissions.…”

“…Wood and Herzog [38] investigated the interaction between economic freedom indicators and air quality represented by CO 2 emissions and concentrations of fine particulate matter in 105 countries for the 2000-2010 period and found that a 1% increase in the economic freedom index decreased concentrations of fine particulate matter by 7.15% in the long-term, but did not find a significant interaction between economic freedom and CO 2 emissions. On the other hand, Rapsikevicius et al [39] analyzed the effect of 10 economic freedom indicators on environmental performance in 23 European economies over 2005-2018 duration by means of correlation analysis, index calculation, clustering, trend analysis and reached mixed findings between economic freedom indicators and environmental performance indicators.…”

Renewable Energy, Agriculture and CO2 Emissions: Empirical Evidence From the Middle-Income Countries

“…In order to capture the role that economic institutions play in predicting CO 2 emissions, we include the economic freedom index (EFI) from Heritage Foundation in our analysis. A number of studies explore the effect of economic freedom on CO 2 emissions in Africa (Adesina and Mwamba, 2019) and EU (Rapsikevicius et al, 2021). The descriptive statistics are reported in Table 1.…”