Economic Freedom Improves Income Mobility: Evidence from Canadian Provinces, 1982–2018

Abstract

Economic freedom is robustly associated with income growth, but does this association extend to the poorest in a society? In this paper, we employ Canada’s longitudinal cohorts of income mobility between 1982 and 2018 to answer this question. We find that economic freedom, as measured by the Fraser Institute’s Economic Freedom of North America (EFNA) index, is positively associated with multiple measures of income mobility for people in the lowest income deciles, including a) absolute income gain; b) the percentage of people with rising income; and c) average decile mobility. For the overall population, economic freedom has weaker effects.

Keywords: Economic Freedom, Income Mobility, Inequality,

JEL Classification: I30, O10, P16