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Institutions Matter: Economic freedom and income mobility

Author

Listed:
  • Callais, Justin T.
  • Geloso, Vincent J.
  • Plemmons, Alicia M.
  • Wagner, Gary A.

Abstract

Intergenerational income mobility — the ability of children to rise above their parents’ economic status — is a key concern in debates over inequality and opportunity. Most research has focused on structural factors like social capital, overlooking the role of economic freedom (market-oriented institutions, lower regulation, secure property rights). Using data on U.S. metropolitan areas, we show that higher economic freedom is strongly associated with greater income mobility. Children in high-freedom areas experience 5 %–12 % more upward mobility than those in low-freedom areas. Economic freedom and social capital operate independently, suggesting multiple paths to mobility. These results highlight that reforms aimed at expanding economic freedom can directly improve opportunity — a practical lever for policymakers concerned with improving income mobility.

Suggested Citation

  • Callais, Justin T. & Geloso, Vincent J. & Plemmons, Alicia M. & Wagner, Gary A., 2025. "Institutions Matter: Economic freedom and income mobility," Economic Modelling, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:ecmode:v:153:y:2025:i:c:s0264999325003463
    DOI: 10.1016/j.econmod.2025.107351
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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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