ECONOMIC FREEDOM AND INCOME LEVELS ACROSS U.S. STATES: A SPATIAL PANEL DATA ANALYSIS

Joshua C. Hall, Donald J. Lacombe, Timothy M. Shaughnessy

Research output: Contribution to journalArticle

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Abstract

There is a large literature estimating the effect of economic freedom on economic growth or income levels. Most studies examine the relationship between economic freedom and growth or income levels for countries, while a few examine the relationship for U.S. states. Absent in the state-level literature is consideration of the presence of spatial spillovers affecting the freedom-income relationship. Neglecting to account for spatial autocorrelation can bias estimation results and therefore inferences drawn. We find evidence of a spatial pattern in real per-capita gross state product (GSP) that affects nonspatial estimates of the freedom-income relationship. Taking into account the direct and indirect effects of economic freedom on real per-capita GSP, we find a 10% increase in economic freedom is associated with a 5% increase in real per-capita GSP. (JEL E02, O47, R11).

Original languageEnglish
Pages (from-to)40-49
Number of pages10
JournalContemporary Economic Policy
Volume37
Issue number1
DOIs
StatePublished - Jan 2019

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