EKOIST Journal of Econometrics and Statistics

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DOI :10.26650/ekoist.2019.30.0005   IUP :10.26650/ekoist.2019.30.0005    Full Text (PDF)

An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling

Kevser Tüter Şahinoğlu, Selay Giray Yakut

This study evaluates the relations between economic performance, democracy index and economic freedoms, which are widely discussed in economic theory. The aim of the study is to examine the direct and indirect impact of the democracy index and economic freedoms on economic performance. These relations, which were evaluated separately in previous studies, were evaluated with the Structural Equation Model, which allows the testing of direct and indirect effects with a single model. In determining the economic performance variables used in the analysis, the variables used in previous studies were taken into consideration. Data collected in a 2017 study from 45 European countries were used. Data from coauntries with insufficient information was excluded from the analysis, The data on the economic freedom variable were taken from The Heritage Foundation (https://www.heritage.org), and the data on the democracy index variable were taken from the Demographic Index report published by The Economist Intelligence Unit. Data for the economic performance variable was obtained from the International Monetary Fund (IMF) and World Bank (World Bank) database. Based on the theory of trying to develop small sample volume and data is a method of estimation independent from the distribution of the Partial Least Square. This study estimates Partial Least Square with the Structural Equation Model, and a smart PLS package program was used in the analysis. As a result of the analysis, it was found that the democracy index has a mediating effect in the relationship between the dimensions of two variables in which economic freedom has no direct effect on economic performance.

Keywords: Economic performance, Economic freedom, Democracy index, Partial least squares, Structural equation model
JEL Classification : C1 , O11 , O43
DOI :10.26650/ekoist.2019.30.0005   IUP :10.26650/ekoist.2019.30.0005    Full Text (PDF)

Yapısal Eşitlik Modeli ile Özgürlüklerin Ekonomik Performansa Etkisi Üzerine Bir İnceleme

Kevser Tüter Şahinoğlu, Selay Giray Yakut

Çalışmada iktisat teorisinde çokça tartışılan konulardan biri olan ekonomik performans, demokrasi indeksi ve ekonomik özgürlükler arasındaki ilişkiler değerlendirilmiştir. Çalışmanın amacı, demokrasi indeksinin ve ekonomik özgürlüklerin ekonomik performans üzerindeki doğrudan ve dolaylı etkisinin incelenmesidir. Daha önceki çalışmalarda ayrı ayrı değerlendirilen bu ilişkiler tek bir model ile doğrudan ve dolaylı etkinin test edilmesine imkan sağlayan yapısal eşitlik modeli ile değerlendirilmiştir. Analizde kullanılan ekonomik performans değişkenleri belirlenirken daha önceki çalışmalarda sıklıkla kullanılan değişkenler dikkate alınmıştır. 45 Avrupa ülkesinin 2017 yılına ait verileri ile çalışma gerçekleştirilmiştir. Bazı ülkelerin verilerinde eksiklik vardır. Bu kayıp gözlemler sayıca az olup, analiz dışı bırakılmıştır. Ekonomik özgürlük değişkenine ait veriler The Heritage Foundation (https://www.heritage.org) sitesinden, demokrasi indeksi değişkenine ait veriler de The Economist Intelligence Unit tarafından yayınlanmış olan demokrasi indeksi raporundan alınmıştır. Ekonomik performans değişkeni için veriler International Monetary Fund (IMF) ve Dünya Bankası (World Bank) veritabanından elde edilmiştir. Çalışmada teoriye dayanılarak model geliştirilmeye çalışılması, küçük örneklem hacmine sahip olunması ve verilerinin dağılımından bağımsız bir tahminleme yöntemi olması sebebi ile Kısmi En Küçük Kareler Yöntemi (Partial Least Square) ile Yapısal Eşitlik Modeli tahmin edilmiştir. Analizde SmartPLS paket programı kullanılmıştır. Yapılan analiz sonucunda ekonomik özgürlüğün ekonomik performans üzerinde doğrudan etkisinin olmadığı iki değişkenin boyutları arasındaki ilişkide demokrasi indeksinin aracı etkiye sahip olduğu tespit edilmiştir.

Keywords: Ekonomik performans, Ekonomik özgürlük, Demokrasi indeksi, Kısmi en küçük kareler, Yapısal eşitlik modeli
JEL Classification : C1 , O11 , O43

EXTENDED ABSTRACT


This study evaluates the relations between economic performance, democracy index and economic freedoms, which are widely discussed in economic theory. The aim of this study is to investigate the direct and indirect effects of democracy index and economic freedoms on economic performance. The study was conducted with the data of 45 European countries for 2017. Data from countries with insufficient information was excluded from the analysis. Data on the economic freedom variable The Heritage Foundation, from the link: https://www.heritage.org/index/ explore?view=by-region-country year & u = 636967067347971774), also contains data on the democracy index variable. The democracy index report published by the Economist Intelligence Unit (The EIU) can be found at the link: https://pages.eiu. com/rs/753-RIQ 438 / images / Democracy_Index_2017.pdf). Data for the economic performance variable were obtained from the International Monetary Fund (IMF) and the World Bank (World Bank) database. The concept of freedom can encompass many different definitions of the idea of economic freedom. Some of these definitions are as follows: Economic freedom consists of a combination of property rights and the protection of individuals, the right to make individual choices and the freedom to compete (Gwartney ve Lawson, 2003, p.406). The concept of economic freedom therefore can be understood to mean that people voluntarily engage in consumption and investment activities at any time without the control and restrictions of the state, that their rights are under state protection and that they participate in the labor force (Şenalp, 2018, p.319). When democracy is defined as a political system, it is a regime in which all adults have the right to vote, where candidates in the election can freely compete, and through periodic elections, decision makers come to power with strong authority (Huntington, 1984, p.195). Democracy also provides freedom and the possibility of self-determination (Schwartz, 1993, p.552). A two-stage approach was used to determine the consistency of the data used in the study with the research hypotheses (Anderson and Gerbing, 1988). In the first step, the measurement model was tested to determine whether the observed variables in the model accurately measured the latent variables to which they belong. This stage of the analysis is considered as Confirmatory Factor Analysis. If the indicator variables that make latent variables measurable do not accurately measure the constructed structure, the next step, the structural model, will not need to be tested. For this reason, the measurement model must meet the requirements for compliance. The second stage includes the testing of the structural model (Huchting, Lac and Labrie, 2008, p.543). When the model was evaluated according to the obtained t-values, there was a direct relationship between economic freedom and democracy index, and between democracy index and economic performance, while no direct relationship was found between economic freedom and economic performance. This suggests that the index of democracy may be a mediating variable. In order to evaluate the mediation effect, a significant relationship was found between economic freedom and economic performance. When the index of democracy is included in the model, the value of the path coefficient between these two variables decreases and the path becomes meaningless. In this case, it can be said that the index of democracy fully mediates the relationship between economic freedom and economic performance. In other words, the relationship between economic freedom and economic performance is indirectly realized through the democracy index. The fact that there is a direct relationship between economic freedom and democracy index and democracy index and economic performance supports the mediating effect (Judd and Kenny, 1981, pp. 605-606; Baron and Kenny, 1986, p.1176-1177). This study shows that economic performance and economic freedom, which are the determinants of the institutional structure for European countries, can be increased with economic performance and economic freedoms in order to improve democracy. For sustainable economic performance, countries should strengthen and add importance to their institutional structures. Countries aiming to increase their economic performance should set policies to increase their democracies and economic freedoms. Since the findings obtained belong to a certain group of countries, they cannot be generalized for all countries of the world. In future studies, analyses can be made for different country groups and time periods. The results obtained by using different analysis programs and different estimation methods can then be compared. The sub-components of economic freedom affect the environment and functioning of the market and contribute to the development of democracy, with the effect it has on entrepreneurship. Furthermore, individual commercial activities positively affect economic performance.


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APA

Tüter Şahinoğlu, K., & Giray Yakut, S. (2019). An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling. EKOIST Journal of Econometrics and Statistics, 0(30), 1-20. https://doi.org/10.26650/ekoist.2019.30.0005


AMA

Tüter Şahinoğlu K, Giray Yakut S. An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling. EKOIST Journal of Econometrics and Statistics. 2019;0(30):1-20. https://doi.org/10.26650/ekoist.2019.30.0005


ABNT

Tüter Şahinoğlu, K.; Giray Yakut, S. An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling. EKOIST Journal of Econometrics and Statistics, [Publisher Location], v. 0, n. 30, p. 1-20, 2019.


Chicago: Author-Date Style

Tüter Şahinoğlu, Kevser, and Selay Giray Yakut. 2019. “An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling.” EKOIST Journal of Econometrics and Statistics 0, no. 30: 1-20. https://doi.org/10.26650/ekoist.2019.30.0005


Chicago: Humanities Style

Tüter Şahinoğlu, Kevser, and Selay Giray Yakut. “An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling.” EKOIST Journal of Econometrics and Statistics 0, no. 30 (Apr. 2024): 1-20. https://doi.org/10.26650/ekoist.2019.30.0005


Harvard: Australian Style

Tüter Şahinoğlu, K & Giray Yakut, S 2019, 'An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling', EKOIST Journal of Econometrics and Statistics, vol. 0, no. 30, pp. 1-20, viewed 25 Apr. 2024, https://doi.org/10.26650/ekoist.2019.30.0005


Harvard: Author-Date Style

Tüter Şahinoğlu, K. and Giray Yakut, S. (2019) ‘An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling’, EKOIST Journal of Econometrics and Statistics, 0(30), pp. 1-20. https://doi.org/10.26650/ekoist.2019.30.0005 (25 Apr. 2024).


MLA

Tüter Şahinoğlu, Kevser, and Selay Giray Yakut. “An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling.” EKOIST Journal of Econometrics and Statistics, vol. 0, no. 30, 2019, pp. 1-20. [Database Container], https://doi.org/10.26650/ekoist.2019.30.0005


Vancouver

Tüter Şahinoğlu K, Giray Yakut S. An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling. EKOIST Journal of Econometrics and Statistics [Internet]. 25 Apr. 2024 [cited 25 Apr. 2024];0(30):1-20. Available from: https://doi.org/10.26650/ekoist.2019.30.0005 doi: 10.26650/ekoist.2019.30.0005


ISNAD

Tüter Şahinoğlu, Kevser - Giray Yakut, Selay. “An Evulation on Effect of Freedoms on Economic Performance with Structural Equation Modeling”. EKOIST Journal of Econometrics and Statistics 0/30 (Apr. 2024): 1-20. https://doi.org/10.26650/ekoist.2019.30.0005



TIMELINE


Submitted14.05.2019
First Revision24.05.2019
Last Revision22.06.2019
Accepted28.06.2019

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