Economic Freedom of North America Overview Dean Stansel

Economic Freedom of North America: Overview Dean Stansel Research Associate Professor O’Neil Center for Global Markets and Freedom www. deanstansel. com 1

Economic Freedom of North America (EFNA) • Fraser Institute’s ranking of the U. S. states and Canadian provinces. • First published in 2002. • The 2015 report was the 11 th edition. • Included Mexican states for 2 nd time. • I have been the primary author of the last three editions. 2

EFNA Impact • Has been cited in over 200 academic journal articles and policy papers. • Compared to other state indices: • Has been produced the longest • Is the only one updated annually • Has the most years of data (33) 3

Area 1: Government Spending 1 A: General Consumption Expenditures, % of Income Total expenditures minus transfers to persons, businesses, & governments, and interest on public debt 1 B: Transfers & Subsidies, % of Income Includes: Welfare Payments, Grants, Agricultural Assistance, Food-stamp Payments, and Housing Assistance 1 C: Insurance & Retirement Payments, % of Income Includes: Employment Insurance, Workers Compensation, & pension plans 4

Area 2: Taxes 2 A: Income & Payroll Taxes, % of Income Personal & Corporate Income Taxes & Payroll Taxes 2 B: Top Marginal Income Tax Rate and the Income Threshold at Which It Applies 2 C: Property Taxes & Other Taxes, % of Income All taxes other than income, payroll, & sales 2 D: Sales Taxes, % of Income All Sales & Gross Receipts Taxes 5

Area 3: Labor Market Freedom 3 Ai: Minimum Wage Annual Income, % of Per Capita Personal Income 3 Aii: Government Employment as a Percentage of Total Employment 3 Aiii: Union Density (percentage of employees who are unionized) 6

Calculations • Each variable given value b/w 0 and 10 • score = ((Max-Obs)/(Max. Min))*10 • Each variable equally weighted within each area • Each area equally weighted • Overall score is average of 3 area scores 7

Best & Worst (US States) Most Free 1 -New Hampshire 2 -South Dakota 3 T-Texas 3 T-Florida 5 -Tennessee 6 -Virginia 7 T-Missouri 7 T-Nebraska 9 T-Arizona, Maryland, North Dakota, Colorado, & Kansas Least Free 50 -New York 49 -California 48 -Alaska 46 T-Hawaii 46 T-New Mexico 43 T-West Virginia 43 T-Kentucky 43 T-Vermont 40 T-Mississippi 40 T-Oregon 40 T-Ohio 8

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Average EFNA Score, U. S. States, 1981 -2013 7. 4 7. 3 7. 2 7. 0 6. 9 6. 8 6. 7 6. 6 6. 4 6. 2 6. 1 6. 4 6. 5 6. 7 6. 5 6. 6 6. 9 7. 07. 0 6. 9 6. 8 6. 9 6. 7 6. 6 6. 4 6. 1 6. 0 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 5. 8 11

Per Capita Income Is Much Higher in States with Higher Economic Freedom Per Capita Income, Percent Above/Below National Average 8% 6% 4% 2% 0% Most Free Second Third Least Free -2% -4% -6% -8% -10% Economic Freedom Quartiles Most Free ……………. Least Free

Average Growth in Per Capita Income, 20042013 (percent) (Deviations from National Mean) Per Capita State Income Growth Is Positively Correlated with Economic 0. 0500 Freedom 0. 0400 0. 0300 0. 0200 0. 0100 -0. 0060 -0. 0040 0. 0000 -0. 0020 0. 0000 -0. 0100 0. 0020 0. 0040 0. 0060 -0. 0200 -0. 0300 -0. 0400 -0. 0500 -0. 0600 Average Growth in Economic Freedom at the All-Government Level, 2004 -2013 (percent) (Deviations from National Mean) 13

Economic Freedom of North America: Overview Dean Stansel Research Associate Professor O’Neil Center for Global Markets and Freedom www. deanstansel. com 14