Analysis of the Relationship Between Economic Freedom & Total Factor Productivity Indicators

( Selected Countries)

Thesis Submitted to

 The Council of the College of Administration & Economics – University of Karbala by

Jaafer  AL-Hosainy

As a Partial Fulfillment of the Requirements of the Ph. D. in Economics

Supervised by

Prof.Dr .Hamid Ebeid Abid Dr. Amer AL-Mamouri

The experience of many countries who implemented extremism and fanaticism in adopting or refusing  economic freedom showed  negative impacts on the efficiency of the  economic performance. This experience led  to reconsider  the role of the state, and created    continuous controversy to define the optimal borders of the economic freedom, within which the efficiency of the economic performance was  achieved.

In concurrence with this controversy, significant and rapid improvements in the production instruments, along with rapid  growth in the phenomenon of economic globalization, emerged the concept of sustainability in growth as a strategic objective.  The concept of sustainability in growth shifted the focus, in efforts to boost competitiveness and increase growth rates, towards improving the efficiency of performance rather than relying on available resources. This shift in focus surfaced the concept of total productivity of factors of production ‘Total Factor Productivity (TFP)’  as a criterion for assessing the level of competence in economic performance, and a basis for sustainability of economic growth.

This new reality has created an impression that  a relationship and an organic correlation between economic productivity freedom and the total factors of production existed. This impression, along with relative success of some liberal experiences in achieving high levels of overall productivity, promoted the economic freedom and the belief of its  positive affect. Promoting the economic  productivity freedom theory provided enough justification to the related international organizations to  adopt the principle of  economic openness as  basis for increasing efficiency in performance.

This research focuses on measuring and analyzing the relationship between the economic productivity freedom and the total factors of production, in realization of  its importance in determining the approach that the state can  adopt in managing the economy. The research assumes a positive relationship between the economic freedom (as an independent variable) and the  productivity of factors of production (as dependent variable). In order to  verify the validity of this assumption, the  research is divided into three chapters in addition to conclusions and recommendations. The first chapter presents the theoretical framework of economic freedom. The second chapter presents the theoretical aspects of the total productivity of factors of production. And the third chapter analyzes practical aspects of three case studies, Canada, Egypt and Malaysia  and considers the possibility of employing the results in Iraq.

               The main conclusions reached by this research is the existence of  weak relationship (not significant statistically) between economic productivity freedom and total factors of production. This weak relationship reveals that the level of productivity is not related to the extent of the role of the state in the economy  but to the nature of this role and its suitability to the matter. This research proposed several recommendations  most notably the need to target specific levels of total productivity by involving  public and private sectors. These goals can be achieved  gradually within  well-defined strategy.