Economic freedom determinants across US states: A Bayesian model averaging approach

This study examines the potential determinants of state-level economic freedom for a panel of the 50 U.S. states from 1994 to 2020. To address model uncertainty in the identification of robust determinants, we use Bayesian model averaging to test the robustness (to the inclusion and exclusion of other determinants) of 17 potential determinants that have been recognized in the extant literature. The results show robustness with respect to the positive impact of the level of per capita real income and its growth, fiscal decentralization and neighbouring state economic freedom, whereas per capita fossil fuel production, population density, unemployment rate and democratic governorships have a negative impact. The remaining determinants were not robustly associated with economic freedom.