Economic freedom in the European Union

Abstract

Economic freedom, denoting the ability to choose among limited resources to satisfy one's needs, constitutes a fundamental, albeit sometimes overlooked, aspect of human freedom. Economic freedom has played a pivotal role throughout the evolution of the European Union. However, in the aftermath of the pandemic, indices of economic freedom have registered a decline both in Europe and globally, due in part to fears over security. However, this is a cause for concern, not only due to the intrinsic value of economic freedom, but also because it has been demonstrated to foster prosperity and to support the quality of democracies. The focus of this thesis is twofold. Firstly, I have constructed a model to ascertain whether economic freedom has contributed to the quality of democracy in the EU, using panel data spanning from 2002 to 2020 across 26 EU Member States and the UK, and employing standard fixed and random effects models. The findings indicate that the Legal System and Property Rights component of the Fraser Institute Economic Freedom in the World Index positively influences the Freedom in the World Index of the Freedom House, along with its component, the Political Rights Index. Secondly, I have quantified the relative contributions of EU institutions and Member States to economic freedom in the EU. This was achieved by estimating stochastic frontier models for two components of the Economic Freedom of the World Index: Freedom to Trade Internationally, representing EU policy, and Labour Regulation, representing Member States' policies, using a panel of data between 2000 and 2020 in EU Member States and the UK. I also developed an indicator of economic freedom in the EU by analysing the gaps between the frontiers and inefficiency estimates for these two indices. The conclusion drawn is that while EU institutions remain a force for freedom in areas within their competence, this role has somewhat diminished over the past two decades.

Date of Award	25 Sept 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	André Azevedo Alves (Supervisor)