The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries

The EU Green Deal and its impact on economic transformation provoked a slightly forgotten free market vs. market regulation discussion, but in the light of a new context-economic and environmental performance development. The economic shock caused by COVID-19, which transformed economies and societies, intensified this discussion. This article analyses the impact of economic freedom on economic performance and environmental performance in European countries. The article contributes to a gap in the literature, because, to date, research has examined the effects of economic freedom, or some of its components, on economic or environmental measures in groups of nations with a lacking sustainable development context. In addition, the mixed results obtained led to confusion in perceptions and knowledge about the influence and usefulness of economic freedom for economic and environmental performance. We also found mixed results regarding the influence of economic freedom on economic and environmental performance, but the introduction of a new concept-the optimal level of economic freedom-organized the different results into a coherent logical sequence. The paper provides original empirical evidence and specifies the targets of structural reforms. The results are thus useful for policymakers to develop more appropriate and efficient economic freedom.