Journal Publications (under construction)
On the Ambiguous Economic Freedom-Inequality Relationship (with Boris Nikolaev).
Forthcoming in Empirical Economics
Abstract: Previous research on the relationship between economic freedom and income inequality has produced mixed results. We provide a short survey of this literature, identifying potential causes for this empirical heterogeneity. Next, we replicate the results from two significant studies using six alternative measures of income inequality for an updated dataset of up to 112 countries over the period 1970–2010. Notably, we use the latest release of the Standardized World Income Inequality Dataset, which allows us to account for the uncertainty of the estimated Gini coefficients. We find that the results of previous studies are sensitive to the choice of country sample, time period and/or inequality measure used. We conclude with suggestions for future research in the area.
Give Me Liberty and Give Me Control: Economic Freedom, Control Perceptions and the Paradox of Choice
(with Boris Nikolaev)
European Journal of Political Economy, 2016, 45(S): 39-52.
Abstract: We explore the relationship between individual control perceptions and the degree to which a country's institutions and policies are consistent with the principles of economic freedom. Using data from the World Values Surveys (WVS) and the Economic Freedom of the World (EFW) index, we find that people living in more economically free countries are more likely to perceive greater control over their lives. This effect is not diminishing at higher levels of economic freedom. One possible channel that explains this relationship is the perception of procedural fairness and social mobility. Decomposing the EFW index, we further find that the area of sound money is what drives the results. Download Paper
Economic Freedom & Happiness Inequality: Friends or Foes?
(with Boris Nikolaev)
Contemporary Economic Policy, 2017, 35(2): 373-391
Abstract: This article examines the relationship between economic freedom and happiness inequality for a large sample of countries. We find that economic freedom is negatively associated with happiness inequality and robust to several alternative measures of happiness inequality, including the standard deviation, mean absolute difference, coefficient of variation, and Gini coefficient. Among the economic freedom areas, legal system and sound money are negatively correlated with happiness inequality. Drawing on the Engerman-Sokoloff hypothesis, we use a measure of factor endowments as an instrument for economic freedom to provide a further robustness test, finding a negative association between economic freedom and happiness inequality.
A Dynamic Analysis of Economic Freedom and Income Inequality in the 50 U.S. States: Empirical Evidence of a Parabolic Relationship
Journal of Regional Analysis & Policy Economy, 2013, 43(1): 42-55.
Abstract: This paper examines the dynamic relationship between economic freedom and income inequality in the fifty U.S. states over the 1979-2004 period. Using fixed effects regression analysis, we find evidence that increases in economic freedom are associated with lower income inequality, but the dynamic relationship between the two variables depends on the initial level of economic freedom. This suggests that there may be an inverted U-shaped relationship between economic freedom and income inequality. The inflection point at which additional increases to economic freedom in a state result in less income inequality is estimated. The results are robust to various time periods and several alternative measures of income inequality.
Subnational Economic Freedom and Performance in the United States and Canada. 2016.
Cato Journal 36(1): 165-185.
Abstract: This paper uses panel data for the United States and Canadian provinces over the period 1980-2010 to examine how subnational economic freedom affects three measures of economic performance. The preliminary results suggest that economic freedom is associated with higher levels of income per capita, lower rates of unemployment and more income inequality.
Evaluating Alternative Measures of Institutional Protection of Private Property and Their Relative Ability to Predict Economic Development (with Hugo Faria, James Gwartney & Daniel Morales). 2016.
Journal of Private Enterprise, 31(2): 57-68.
Abstract: Economic theory and a growing body of empirical evidence suggest that private property rights are an important determinant of economic development. In this paper, five commonly used measures of institutional protection of private property rights are assessed, including their relative ability to predict the level of GDP per capita. The risk of expropriation measure from the International Country Risk Guide, the rule of law measure from the World Governance Indicators, and the property rights indices from the Economic Freedom measures of the Fraser Institute and Heritage Foundation exert a similar and robust positive impact on the level of economic development. The executive constraints measure from Polity IV exerts a much smaller impact, and is sensitive to model specification. The methodological strengths and weaknesses of each measure are also addressed. The analysis provides researchers with guidance on selecting an appropriate measure of private property institutions for empirical studies.
Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective
(with Hugo Faria, James Gwartney, and Daniel Morales).
Forthcoming in World Development
Abstract: Existing literature suggests that either colonial settlement conditions or the identity of colonizer were influential in shaping the post-colonial institutional environment, which in turn has impacted long-run economic development, but has treated the two potential identification strategies as substitutes. We argue that the two factors should instead be treated as complementary and develop an alternative and unified IV approach that simultaneously accounts for both settlement conditions and colonizer identity to estimate the potential causal impact of a broad cluster of economic institutions on log real GDP per capita for a sample of former colonies. Using population density in 1500 as a proxy for settlement conditions, we find that the impact of settlement conditions on institutional development is much stronger among former British colonies than colonies of the other major European colonizers. Conditioning on several geographic factors and ethno-linguistic fractionalization, our baseline 2SLS estimates suggest that a standard deviation increase in economic institutions is associated with a three-fourths standard deviations increase in economic development. Our results are robust to a number of additional control variables, country subsample exclusions, and alternative measures of institutions, GDP, and colonizer classifications. We also find evidence that geography exerts both an indirect and direct effect on economic development.
Factor Endowments, the Rule of Law, and Structural Inequality (with Boris Nikolaev).
Journal of Institutional Economics,
2016, 12(4): 773-795.
Abstract: This paper provides an empirical test of the Engerman–Sokoloff hypothesis that factor endowments influenced the development of the rule of law, which in turn has perpetuated income inequality. Using a measure of the suitability of land for growing wheat relative to sugarcane as an instrument for the rule of law, as measured by area 2 of the Economic Freedom of the World index, we estimate the potential causal impact of the rule of law on the long-run net income inequality. Conditioning on geography, ethnolinguistic fractionalization and legal tradition, the rule of law exerts a negative impact on inequality that is both economically and statistically significant. The results are robust to additional control variables, two alternative measures of the rule of law, an alternative instrumental variable and the exclusion of strategic country samples and outliers.
Institutions and Well-Being
(with Toke Aidt and Boris Nikolaev).
European Journal of Political Economy, 2016, 45(S): 1-10.
Editorial article providing a literature review and introduction to the special issue on Institutions and Well-Being.
Public Policy, Higher Education, and Income Inequality in the United States: Have We Reached Diminishing Marginal Returns?
(with Richard Vedder)
Social Philosophy & Policy, 2015, 31(2): 252-280.
Abstract: Public policy designed to promote greater college enrollment rates has often been justified as a means to reduce income inequalities, yet there is very little evidence that higher college attainment is associated with less inequality. Economic theory at best suggests that the relationship between college attainment and inequality is ambiguous. An overview of some of the unintended consequences of public policies designed to promote greater enrollment is described. One such consequence is that the growth in college completion, which is at least partially attributable to public policy, may have actually contributed to rising income inequality. We hypothesize the existence of a U-shaped relationship between college attainment and income inequality, and using panel data for the 50 U.S. states over the period 1970-2004 provide empirical evidence in support of the curve. Prior to the mid 1990’s, increases in attainment were associated with less inequality for most states. Rapid growth in attainment since then has moved most states to the right of the inflection point such that attainment gains are associated with more inequality in most states. Download Paper
Myth Busting: The Laissez Faire Origins of American Higher Education. 2014.
The Independent Review: A Journal of Political Economy 18(4): 503-526.
Abstract: A common view among American higher education scholars is that the sector was governed by a free market during the post-Revolution antebellum period. An analysis of the political economy during the period within the framework of a true free-market for higher education suggests that it did exhibit elements of laissez-faire, but that it was also subject to a substantial amount of market-distorting state intervention. Institutional autonomy and the protection of private property rights post-1819, liberal regulatory regimes in many states, and evidence of market entry and exit support the laissez faire origins hypothesis. Direct and indirect government subsidization, the establishment of state institutions and protectionist policies in some states oppose it.
Further Evidence against the Laissez Faire Origins of American Higher Education Hypothesis. 2013.
Journal of Business and Economic Perspectives 40(2): 113-120.
Abstract: Bennett (2014) provides a critical challenge to a common view held by education scholars that American higher education was governed by a free market during the post-Revolution antebellum, suggesting that the state was more involved in shaping the sector than has traditionally been recognized. This paper provides further evidence against the laissez faire origins of higher education. Protectionist regulatory regimes in Michigan and New York hindered competition in these states. Distortionary subsidies in many other states such as Massachusetts, Maryland and Virginia gave successful rent-seeking institutions an advantage over unsuccessful ones.