A Canadian think tank ranked Michigan 31st out of 50 on a national economic freedom index.
The Fraser Institute’s “ Economic Freedom of North America in 2020,” is the 16th edition of a report measuring economic freedom in 2018. Using 10 variables, including government spending, taxes, and labor market freedom, it ranked North America states and provinces on a scale from zero to 10.
The report uses two indices to compare jurisdictions in both the same and different countries.
In the all-government section, the report factors in the legal systems and property rights, sound money policies, and freedom of international trade.
States and provinces’ scores in each subcomponent are averaged to reach an overall score.
The freest state in the nation is New Hampshire at 8.16, followed by Florida and Idaho at 8.10, then Wyoming and Utah at 8.09 and 8.08, respectively.
Michigan was ranked at 6.0, or 31 out of 50.
Fraser Institute’s study shows that people who live in states and areas with higher levels of economic freedom often receive higher incomes.
“ Jurisdictions in the most-free quartile had per-capita incomes 4.6% above the national average, while those in the least-free quartile were 8.1% below it,” the report found. “In each index, average per-capita income in the most-free jurisdictions is substantially higher than in those that are the least free.”
Among Midwestern states, Michigan barely beat out Ohio (35) and Illinois (34), but lost to Wisconsin (19) and Indiana (8).
Minnesota scraped the bottom of the Midwest states at 40th.
New York came in last with a 4.25 score.
The economic index matters because previous studies have analyzed the relationship between economic freedom and well-being measured by income and economic growth.
A study published in Contemporary Economic Policy linked economic freedom to higher levels of economic growth and income.
The researchers found evidence of a pattern in real per‐capita gross state product (GSP) that affects the freedom‐income relationship.
“Taking into account the direct and indirect effects of economic freedom on real per‐capita GSP, we find a 10% increase in economic freedom is associated with a 5% increase in real per‐capita GSP.”
Economic freedom of the all-governmental level and income per capita in Canada, the United States, and Mexico in 2018.
Fraser Institute study graph“The results of the experiments of the twentieth century should now be clear: free economies produce the greatest prosperity in human history for their citizens,” the report says. “Even poverty in these economically free nations would have been considered luxury in unfree economies.”
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