Long-Run Relatıonshıp between Economıc Freedom and Income Inequalıty: Evidence from G-7 Countrıes

Abstract: This paper examines the long run relationship between economic freedoms and income inequality in G-7 [1] countries overthe2000 – 2015period. The World Economic Freedom Index (EFW) that created by the Fraser Institute is one of the methods of measuring economic freedoms in a country. The EFW consists of five sub-indices: size of the government, legal system and property rights, sound money, freedom to trade internationaly and regulations. According to the results of this study, EFW increases income inequality in G-7 countries. However, all of the areas of economic freedom do not affect income inequality in the same direction. While freedoms in government size and legal system areas has increased the income inequality; freedoms in free trade to internationally, sound money and regulation areas reduce income inequality. [1] United States, Canada, United Kingdoom, Germany, France, Japan, Italy