Competitive Incentives of Economic Freedom for Bordering States: The Case of Tennessee vs. Kentucky

Abstract

Increasing the reach of government into everyday economic interactions, whether through the government as a consumer/producer or as a taker of taxes, is not likely to create an environment in which economic activity will flourish. Improving economic growth requires that individuals and firms make decisions that allow them to combine labor, capital, and technology to produce goods and services. This means that increased government intrusion into the market, onerous regulations, and lack of competition in labor markets all can hinder economic growth. The questions addressed in this case study are: By comparing Tennessee’s record in promoting economic freedom to Kentucky, the authors research the divergent economic directions. Furthermore, what is it that Tennessee is doing to stay at the top and Kentucky at the bottom of the Fraser Institute’s Economic Freedom of North America index and the Cato Institute’s “Freedom in the 50 States” index?