Why Some US Indian Reservations Prosper While Others Struggle

Our colleague Thomas Stratmann writes about the political economy of Indian reservations in his excellent Substack Rules and Results.

Across 123 tribal nations in the lower 48 states, median household income for Native American residents ranges from roughly $20,000 to over $130,000—a sixfold difference. Some reservations have household incomes comparable to middle-class America. Others face persistent poverty.

Why?

The common assumption: casino revenue. The data show otherwise. Gaming, natural resources, and location explain some variation. But they don’t explain most of it. What does? Institutional quality.

The Reservation Economic Freedom Index 2.0 measures how property rights, regulatory clarity, governance, and economic freedom vary across tribal nations. The correlation with prosperity is clear, consistent, and statistically significant. A 1-point improvement in REFI—on a 0-to-13 scale—correlates with approximately $1,800 higher median household income. A 10-point improvement? Nearly $18,000 more per household.

Many low-REFI features aren’t tribal choices—they’re federal impositions. Trust status prevents land from being used as collateral. Overlapping federal-state-tribal jurisdiction creates regulatory uncertainty. BIA approval requirements add months or years to routine transactions. Complex jurisdictional frameworks can deter investment when the rules governing business activity, dispute resolution, and enforcement remain unclear.

This is an important research program. In addition to potentially improving the lives of native Americans, the 123 tribal nations are a new and interesting dataset to study institutions.

See the post for more details amd discussion of causality. A longer paper is here.

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