Economic Freedom and Income Levels Across U.S. States: A Spatial Panel Data Analysis

10 Pages Posted: 30 Nov 2018

See all articles by Joshua C. Hall

Joshua C. Hall

West Virginia University

Donald J. Lacombe

West Virginia University - Regional Research Institute

Timothy Shaughnessy

Louisiana State University, Shreveport

Date Written: January 2019

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 Classification: E02, O47, R11

Suggested Citation

Hall, Joshua C. and Lacombe, Donald J. and Shaughnessy, Timothy, Economic Freedom and Income Levels Across U.S. States: A Spatial Panel Data Analysis (January 2019). Contemporary Economic Policy, Vol. 37, Issue 1, pp. 40-49, 2019, Available at SSRN: https://ssrn.com/abstract=3293197 or http://dx.doi.org/10.1111/coep.12287

Joshua C. Hall (Contact Author)

West Virginia University ( email )

Morgantown, WV 26506
United States

Donald J. Lacombe

West Virginia University - Regional Research Institute ( email )

P.O. Box 6825
Morgantown, WV 26506-6825
United States
1-304-293-8543 (Phone)
1-304-293-6699 (Fax)

HOME PAGE: http://community.wvu.edu/~djl041/

Timothy Shaughnessy

Louisiana State University, Shreveport ( email )

Shreveport, LA
United States

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