Matt Mitchell over at Mercatus’s blog, Neighborhood Effects, has been examining the usefulness of various freedom indices and their ability to predict economic progress. His conclusion in particular caught my eye:
The two indices with the best record for predicting economic progress were the Economic Freedom of North America index by Fraser (“the strongest and most robust evidence”) and the State Business Tax Climate by the Tax Foundation. Looking at the Fraser index, they found that moving a state from the 40th to the 10th place in terms of economic freedom “would increase the rate of growth of employment by 0.317 percentage point.” Given that the mean employment growth rate is 1.15 percent, this amounts to about 30 percent faster employment growth.
Not to toot my own horn . . . OK, I’m going to toot my own horn, but my wife and I were the original co-creators of the Tax Foundation’s State Business Tax Climate Index. The vast majority of which has remained unchanged from the first few editions that we published.
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