Role of economic freedom in the research and development- productivity growth nexus: Panel dynamic ordinary least square evidence

This study investigates the relationship economic freedom, Research and Development
both domestic and foreign, and productivity growth. The main motivation of the study
is to examine the role of economic freedom as a mediating factor of research and
development on productivity growth. We analyzed 37 selected developing countries,
with data spanning from 2000 to 2010.We adopted the model and framework
introduced Coe and Helpman (1995) whereas this model can be seen as an extension
of Mansfield’s (1984). We employed the Panel Dynamic Ordinary Least Square (PDOLS)
proposed by Stock and Watson (1993) which capture the long run relationship
and the short run relationship to analyze and estimate the model. The finding indicates
that economic freedom positively mediate both domestic and foreign R&D on
productivity growth, but the result indicates higher elasticity value of domestic R&D
comparisons to foreign R&D and the findings is concurrent with most of the past
literatures. Policy marker and government should provide or formulate policy and
ready to reduce their intervention to ensure that country is freer because economic
freedom is one of the main drivers of prosperity and growth.