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

Author

Listed:
  • Joshua C. Hall

    (West Virginia University, Department of Economics)

  • Donald J. Lacombe

    (West Virginia University, Agricultural and Resource Economics)

  • Timothy M. Shaughnessy

    (Louisiana State University, Department of Economics)

Abstract

There is a substantial literature estimating the effect of economic freedom on economic growth. Most studies examine the relationship between freedom and growth 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{growth 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 GSP that affects non-spatial estimates of the freedom{growth relationship. Taking into account the direct and indirect effects of economic freedom on GSP, we find a 10 percent increase in economic freedom is associated with a 4.2 percent increase in GSP.

Suggested Citation

  • Joshua C. Hall & Donald J. Lacombe & Timothy M. Shaughnessy, 2015. "Economic Freedom and Economic Growth Across U.S. States: A Spatial Panel Data Analysis," Working Papers 15-33, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:15-33
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    References listed on IDEAS

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    spatial panel data model; spatial econometrics; economic freedom;
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