Center for Economics and the Environment: Policy Series
Increasing the reach of government into everyday economic interactions, whether through the government as a consumer/producer or as a taker of taxes, is not likely to create an environment in which economic activity will flourish. Improving economic growth requires that individuals and firms make decisions that allow them to combine labor, capital, and technology to produce goods and services. This means that increased government intrusion into the market, onerous regulations, and lack of competition in labor markets all can hinder economic growth. The question addressed in this study is: Does Missouri’s record in promoting economic freedom help explain its lack of economic success?
To answer this question, changes in a measure of economic freedom in each state are compared to the growth rates of real output. Comparing the behavior of these two measures over time indicates that states that have experienced improvements in economic freedom over the past couple of decades— slower increases in government involvement in the economy—are, on average, more likely to have experienced higher rates of economic growth. Looking specifically at Missouri, the results suggest that Missouri’s tepid economic growth is related to its equally lackluster record in improving the economic freedom of its citizens and businesses.
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Hafer, R. W., "Is There a Link Between Economic Freedom and State Economic Growth?" (2017). Center for Economics and the Environment. 8.