The dynamics of non-intervention: applying the dynamic common correlated effects estimator to state-level economic freedom

Colin O’Reilly and Ryan H. Murphy

Applied Economics, 2025, vol. 57, issue 51, 8612-8626

Abstract: The relationship between economic freedom and economic performance is well-studied. We contribute to a dimension of the literature concerned with subnational economic freedom and subnational economic performance through the application of the Dynamic Common Correlated Effects estimator, which allows estimation for the first time to take into account cross-sectional dependence and heterogeneous slopes among US states. We find a positive relationship between economic freedom and economic growth, though when applying a battery of control variables, some specifications lose statistical significance.

Date: 2025
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DOI: 10.1080/00036846.2024.2400386

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