Sharma, A.; Tomic, A.; Fulton, L. Evaluating and Improving the Metropolitan Economic Freedom Index. Social Indicators Research 2024, doi:10.1007/s11205-024-03324-9.
Sharma, A.; Tomic, A.; Fulton, L. Evaluating and Improving the Metropolitan Economic Freedom Index. Social Indicators Research 2024, doi:10.1007/s11205-024-03324-9.
Sharma, A.; Tomic, A.; Fulton, L. Evaluating and Improving the Metropolitan Economic Freedom Index. Social Indicators Research 2024, doi:10.1007/s11205-024-03324-9.
Sharma, A.; Tomic, A.; Fulton, L. Evaluating and Improving the Metropolitan Economic Freedom Index. Social Indicators Research 2024, doi:10.1007/s11205-024-03324-9.
Abstract
The Metropolitan Economic Freedom Index (MEFI) ranks cities based on their support of free market enterprise. In its current state, MEFI purports to measure three constructs (government spending, taxation, and labor market freedom) with three equally weighted variables for each one, assuming perfect substitutability of variables. This study investigates the statistical consistency of MEFI through Confirmatory Factor Analysis. Multiple models investigate current variable selection by providing a potentially better indicator of labor market freedom, aggregation assumptions by removing the requirements for fixed and equal weights, and statistical consistency by evaluating the fit between the data and models. Results indicate that the current MEFI model is not statistically consistent with the data, that weighting of variables should not be equal, that variable selection should be investigated, and that constructs should be re-imagined. The models investigated provide an initial starting point for redefining MEFI.
Keywords
economic freedom; factor analysis; MEFI; labor market; government spending; taxation
Subject
Business, Economics and Management, Econometrics and Statistics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
