ECONOMIC FREEDOM AND STRUCTURAL TRANSFORMATION IN SHAPING LONG-RUN ECONOMIC DEVELOPMENT
Abstract
Economic freedom is recognized as a fundamental institutional determinant of long-run economic development, as it shapes incentives for investment, entrepreneurship, innovation, and efficient resource allocation. The aim of the article is to examine the role of economic freedom as a structural determinant of long-run economic development, to analyze Ukraine’s current position within the global Economic Freedom of the World index, to identify the institutional factors underlying its low ranking in 2023, and to assess the mechanisms through which these constraints affect long-term economic, social, and institutional development. Unlike short-term macroeconomic fluctuations, long-run development depends on stable institutional configurations that influence productivity dynamics, capital accumulation, structural transformation, and resilience to shocks. Economic freedom is measured by the EFW index across five key dimensions: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation. The study presents a comparative analysis of Ukraine’s ranking and identifies the key determinants of Ukraine’s economic freedom. Particular attention is paid to institutional weaknesses in the legal system and property rights protection, regulatory burden, macroeconomic instability, and governance quality, which collectively constrain economic autonomy and long-term growth potential. The ongoing full-scale war has further intensified structural limitations through expanded state intervention, trade disruptions, and increased uncertainty. The article expands on the determinants of economic freedom, identifies their mechanisms of influence, and evaluates their current state in Ukraine. Based on this assessment, recommendations are proposed to strengthen judicial independence, improve regulatory efficiency, enhance monetary stability, expand trade integration, reduce corruption, and support post-war reconstruction. The findings suggest that improving economic freedom is essential for restoring investor confidence, fostering entrepreneurship, increasing productivity, and ensuring sustainable economic and social development in Ukraine.
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