The literature on economic freedom has primarily focused on nations, where differences are largest. However, though the differences in economic freedom within individual nations are smaller, there are numerous advantages of examining issues at the sub-national level. In this chapter we discuss theses sub-national indices of economic freedom and issues related to their use by empirical researchers. For example, there are much smaller differences in culture and other institutions that are difficult to quantify and thereby include in an econometric model. In addition, the geographic boundaries are at least somewhat less arbitrary, particularly at the metropolitan area level. We argue that the existence of the sub-national indices of economic freedom provide great opportunities for future research on important issues regarding the relationship between governmental institutions and a variety of economic outcomes.
Dean Stansel and Jamie Bologna
Joshua C. Hall, Dean Stansel and Danko Tarabar
We synthesize and elaborate on the existing research concerning the role of the Economic Freedom of North America (EFNA) index. Our consensus after reading this literature is that the EFNA index is largely positively related with normatively good outcomes, and negatively related to normatively bad ones, with a few exceptions. The literature considers the EFNA index as a good proxy for institutional quality, regulatory environment, and business-related policies across North American states and provinces. In addition, a significant number of studies take interest in the EFNA as a variable to be explained by factors such as ideology, legal origins, and pro-market think tank spending. The literature on EFNA is still in its relative nascence, but is growing rapidly, and can provide a useful guide towards future policy changes leading into positive institutional transformations and hence better economic outcomes.