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A spatial analysis of incomes and institutional quality: evidence from US metropolitan areas

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  • BOLOGNA, JAMIE
  • YOUNG, ANDREW T.
  • LACOMBE, DONALD J.

Abstract

We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per-capita income growth and per-capita income levels. We find that while economic freedom and income levels are directly and positively related, increases in economic freedom in one area result in negative indirect effects on income levels in surrounding areas. In addition, we find that economic freedom has an insignificant relationship with economic growth.
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Suggested Citation

  • Bologna, Jamie & Young, Andrew T. & Lacombe, Donald J., 2016. "A spatial analysis of incomes and institutional quality: evidence from US metropolitan areas," Journal of Institutional Economics, Cambridge University Press, vol. 12(01), pages 191-216, March.
  • Handle: RePEc:cup:jinsec:v:12:y:2016:i:01:p:191-216_00
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    1. Thomas A. Garrett & Russell M. Rhine, 2011. "Economic freedom and employment growth in U.S. states," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 1-18.
    2. Young, Andrew T. & Higgins, Matthew J. & Levy, Daniel, 2013. "Heterogeneous convergence," Economics Letters, Elsevier, vol. 120(2), pages 238-241.
    3. Luisa Corrado & Bernard Fingleton, 2012. "Where Is The Economics In Spatial Econometrics?," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 210-239, May.
    4. Jan-Egbert Sturm & Jakob De Haan, 2001. "How robust is the relationship between economic freedom and economic growth?," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 839-844.
    5. Matthew Higgins & Andrew Young & Daniel Levy, 2009. "Federal, state, and local governments: evaluating their separate roles in US growth," Public Choice, Springer, vol. 139(3), pages 493-507, June.
    6. Matthew Higgins & Daniel Levy & Andrew Young, 2003. "Growth and Convergence across the U.S.: Evidence from County-level Data," Emory Economics 0306, Department of Economics, Emory University (Atlanta).
    7. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-619, October.
    8. Arbia, Giuseppe & Battisti, Michele & Di Vaio, Gianfranco, 2010. "Institutions and geography: Empirical test of spatial growth models for European regions," Economic Modelling, Elsevier, vol. 27(1), pages 12-21, January.
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    11. Lundstrom, Susanna, 2005. "The effect of democracy on different categories of economic freedom," European Journal of Political Economy, Elsevier, vol. 21(4), pages 967-980, December.
    12. de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
    13. Steven F. Kreft & Russell S. Sobel, 2005. "Public Policy, Entrepreneurship, And Economic Freedom," Cato Journal, Cato Journal, Cato Institute, vol. 25(3), pages 595-616, Fall.
    14. Matthew J. Higgins & Andrew T. Young & Daniel Levy, 2010. "Robust correlates of county-level growth in the United States," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 293-296, February.
    15. Joshua C. Hall & Robert A. Lawson, 2014. "Economic Freedom Of The World: An Accounting Of The Literature," Contemporary Economic Policy, Western Economic Association International, vol. 32(1), pages 1-19, January.
    16. James D. Gwartney & Robert A. Lawson & Randall G. Holcombe, 1999. "Economic Freedom and the Environment for Economic Growth," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(4), pages 643-643, December.
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    Citations

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    Cited by:

    1. Jamie Bologna, 2017. "Contagious corruption, informal employment, and income: evidence from Brazilian municipalities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 58(1), pages 67-118, January.
    2. repec:eme:jepppp:jepp-02-2016-0004 is not listed on IDEAS
    3. Jamie Bologna & Joshua C. Hall, 2014. "Economic Freedom Research: Some Comments and Suggestions," Working Papers 14-23, Department of Economics, West Virginia University.
    4. repec:eme:jepppp:jepp-12-2015-0038 is not listed on IDEAS

    More about this item

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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