Brandon Parsons' New Research Shows Economic Freedom Can Reduce Conflict and State Fragility

A new study by Pepperdine Graziadio faculty member Brandon Parsons, published in Economic Analysis and Policy, finds that economic freedom significantly reduces internal conflict and state fragility in developing countries. The research analyzes data from 92 developing countries between 1985 and 2020, examining how economic freedom influences civil war and coups, terrorism and political violence, civil disorder, and overall governance stability.

Using the Fraser Institute’s Economic Freedom of the World index, Parsons finds strong support for capitalist peace theory, showing that higher levels of economic freedom are associated with lower levels of internal conflict and reduced state fragility. The findings are robust across multiple econometric models and time frames, strengthening confidence in the results.

The study also reveals important nuances. While economic freedom’s stabilizing effects are weaker for civil wars and coups, where cultural and ideological forces often dominate, it consistently reduces civil disorder, suggesting that expanded economic opportunity lowers incentives for protest. In cases of terrorism and political violence, economic freedom becomes most effective in high-conflict environments, where opportunity costs for violence are greatest.

Among the five dimensions of economic freedom, strong legal systems and property rights, sound money, and freedom to trade internationally show the most consistent conflict- and fragility-reducing effects. By contrast, policies focused on smaller government and deregulation can increase fragility by weakening state capacity and eroding protections, potentially fueling grievances.

Overall, the research highlights economic freedom as a critical tool for promoting stability and resilience in vulnerable states, particularly where conflict and fragility are most severe. Read the full article here.