Thursday 23 April 2009

Does information freedom matter for growth?

In theory, information freedom should be important for growth. If someone wants to take advantage of the best available opportunities in a market, they have to know about them before they mobilise resources. Transparency in government procedures should also encourage investment.

I ran some quick tests on whether information freedom matters in the form of press freedom. I graphed average annual gdp per capita growth in the period 1994-9 against the Reporters Without Borders press freedom index for countries in 2008 (available here). The mismatch in dates weakens the causal links from the index to growth - I assumed that the current index is highly correlated with the index in the past. The mismatch was accepted in order to maximise the available data points. I could put in many cautions about my use of the RSF index, but won't for brevity.

Here is the graph for African countries, with a trend line:



and here is the one for world countries:



It looks like more press freedom is associated with increased growth. There might be causality in either direction. The weak is link, but that is often the outcome of quick correlations between growth and its determinants. For example, here is the African growth-savings graph from 1994-9:



and here is the world graph:



Stronger links tend to be hidden in the data and require digging to show them.

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