Countries with more open economies are less homophobic, but not less racist

A paper by Swedish economists Niclas Berggen and Therese Nilsson published in Kykklos attempts to discover whether countries with higher levels of economic freedom also have more tolerant societies. 

They compare the scores of 65 countries as measured by the Fraser Institute’s Economic Freedom Index, which looks at "size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and regulation of credit,  labor and business." Tolerance levels are measured using World Values Survey data on "tolerance for homosexuals," "tolerance [for] race" and attitudes on the "importance of teaching kids tolerance."

They found that the "correlation is weaker between economic freedom and tolerance for people of a different race than between economic freedom and tolerance toward homosexuals and our
measure on the importance to teach kids tolerance. Second, the sign of the correlations
are positive throughout."

This result is likely to ring some correlation/causation alarm bells for readers, and it seems quite possible that exogenous factors such as level of economic development could be driving both tolerance and economic freedom. The authors do find that the effect is stronger in countries with higher GDP levels but also that it’s still robust at all development levels. 

The paper is a bit similar to Richard Florida’s argument that higher concentrations of gay men and lesbians in American cities lead to higher property values — and Florida’s work is prominently cited — though Berggen and Nilsson see the causation running the other way — economic freedom turning societies more tolerant.

So why are free-market countries more accepting of gays but not (to the same degree) of racial minorities? The authors write:

We do not consider it strange that tolerance towards homosexuals is most strongly related to economic freedom, due to the different character of being a homosexual and a person of a different race. For example, homosexuals are to a large extent present in families and in the workplace. This may very well suggest to people that homosexuals are well integrated and not a threat under a liberalized economic regime. People of another race, on the other hand, may to a larger degree be perceived as being different, less integrated and possibly a social and economic burden to society, with less tolerance emerging as a result.

I’m not sure the argument that people in liberalized economies are more tolerant only to those who are not perceived as an economic threat is really all that encouraging, though with anti-immigrant political sentiment rising in many western countries at the same time that laws protecting gay rights and same-sex marriage are becoming more widespread, it does have a ring of truth about it.