The Relationship Between Economic Freedom And Income Equality In The United States

Abstract

While considerable research in the past has focused on the socioeconomic impact of economic freedom on economic growth among nations, less emphasis has been devoted to the relationship between economic sovereignty and income equality. This is particularly true when the area of focus has been restricted to comparisons among states within the United States. Furthermore, what work has been offered comparing US states has proven to be contradictory. Certain studies reviewed in this paper suggest that higher measures of economic freedom are associated with greater income inequality. On the other hand, evidence exists that less inequality is found in areas with greater economic autonomy. This study uses the Gini Index as measures of income distribution. The Fraser Institute in Vancouver, Canada offers well-respected measures of economic freedom among the US states and the provinces of Canada. These data are used to further examine relationships between state levels of economic freedom and income distribution with the intent to offer some general consensus regarding this all-important association.