Does Economic Freedom Foster Tolerance?

Abstract

SummaryTolerance has the potential to affect both economic growth and wellbeing. It is therefore important to discern its determinants. We contribute to the literature by investigating whether the degree to which economic institutions and policies are market‐oriented is related to different measures of tolerance. Cross‐sectional and first‐difference regression analysis of up to 69 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affected by how free markets are. Stable monetary policy and outcomes is the area of economic freedom most consistently associated with greater tolerance, but the quality of the legal system seems to matter as well. Through instrumental variables and first‐difference results we find indications of a causal relationship.