Dr. LEE Shu KamDr. WOO Kai YinDr. YEUNG Wai Man, RaymondRaymondDr. YEUNG Wai Man2012-10-042012-10-0420129789881844552http://hdl.handle.net/20.500.11861/834The neoclassical growth model stresses the importance of investments in physical and human capital, as well as technological advancement, in fostering economic growth. However, new institutional economists argue that it does not explain why investment rates or productivity levels are different across countries, whereas quality of a nation‘s institutions, and by implication, the degree of economic freedom, can influence both availability and productivity of human and capital resources and economic growth. On the other hand, it is argued that economic freedom can be viewed as a normal good. Economic growth leads to higher living standards in a nation and creates larger demand for a higher level of economic freedom. This study, therefore, attempts to employ panel cointegration and Granger causality tests to evaluate the dynamic relationship between economic freedom and real GDP per capita. The empirical findings show that the long-run causal link between real GDP per capita and economic freedom cannot be rejected and hence they can undergo the error-correcting process to maintain their long-run relations intact.enEconomic FreedomEconomic GrowthGranger-CausalityWorking Paper