Equation 6 of Table 3 incorporates the methodology of Equation 4; the residuals from regressions 3 and 6 in Table 2 are substituted for the Kpw and Hpw variables, respectively.
The growth of physical capital for countries in the tropics tends to be slower, but the coastal variable fails to exert a statistically significant impact on the growth of Kpw. In the final regression with the growth rate of human capital as the dependent variable, none of the independent variables are statistically significant.
In the specification of Equation 3, the EFW variable will reflect the impact of a one-unit change in institutional quality after the effects of the other variables, including Kpw, have been registered.
The residuals from Equation 4 of Table 5 measure the cross-country variation in Kpw that is unrelated to EFW and the other independent variables of Equation 3 in Table 7.
In Equation 1, the three economic freedom variables are considered along with the changes in Kpw and Hpw during the two decades.
In order to better measure the total impact of EFW, once again we estimate the impact of the independent variables of Equation 3 on Kpw and then insert the residuals from this equation into the model instead of Kpw.