Subnational Economic Freedom and Performance in the United States and Canada

During his illustrious career spanning more than half a century, Richard Vedder has tirelessly advocated for limited government and free enterprise. Much of his scholarship has focused on examining how fiscal and labor market policies consistent with the principles of economic freedom are associated with economic and social benefits such as stronger economic performance (Vedder 1981, 1990), lower unemployment (Vedder and Gallaway 1996, 1997), and poverty alleviation (Vedder and Gallaway 2002). Vedder has also examined the impact of government policy on income inequality (Vedder 2006; Vedder and Gallaway 1986, 1999; Vedder, Gallaway, and Sollars 1988), an area that he and I have collaborated to study (Bennett and Vedder 2013, 2015). Thus, Vedder's scholarship has contributed to our understanding of the impact that economic freedom exerts on economic outcomes.

Vedder's research has primarily examined the effects of individual policies such as the structure of taxation and barriers in the labor market, but a mounting body of academic research links aggregate measures of economic freedom to a variety of positive economic, political, and social outcomes. Hall and Lawson (2014) and Hall, Stansel, and Tarabar (2016) provide recent surveys of this literature. This article builds on my previous work with Vedder and contributes to the growing body of research on the effects of economic freedom by examinining the relationship between subnational economic freedom and various measures of economic performance for a panel of U.S. states and Canadian provinces over the period 1980-2010.