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Economic Freedom and Growth: The Case of the Celtic Tiger
By Benjamin Powell
Introduction
Ireland was one of Europe's poorest countries for more than two centuries. Yet, during the 1990s, Ireland achieved a remarkable rate of economic growth. By the end of the decade, its GDP per capita stood at $25,500 (in terms of purchasing power parity), higher than both the United Kingdom at $22,300, and Germany at $23,500 (Economist Intelligence Unit [EIU] 2000: 25). In 1987, Ireland's GDP per capita was only 63 percent of the United Kingdom's (The Economist 1997). As Figure 1 shows, almost all of the catching up occurred in a little over a decade. From 1990 through 1995, Ireland's GDP increased at an average rate of 5.14 percent per year, and from 1996 through 2000, GDP increased at an average rate of 9.66 percent (International Monetary Fund 2001).
Most theories of economic growth can be dismissed as an explanation for the rapid growth of the Irish economy. The thesis of this paper is that no one particular policy is responsible for Ireland's dramatic economic growth. Rather, a general tendency of many policies to increase economic freedom has caused Ireland's economy to grow rapidly.
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