Why Some Reservations Prosper While Others Struggle: The Data

Median household incomes across tribal nations vary by a factor of six. The Reservation Economic Freedom Index 2.0 shows institutional quality explains the gap.

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.

This isn’t theory. This is what the data from 123 reservations show: when institutions work, when property rights are clear, regulations are predictable, governance is accountable, and economic freedom is high, prosperity follows.

The Pattern Across Reservations

The correlation between institutional quality and prosperity is clear. Figure 1 shows the relationship for median household income. (Household income data are available for 121 of the 123 reservations in REFI 2.0; two reservations lack sufficient American Community Survey sample sizes for reliable household income estimates.)

Figure 1. Economic freedom and median Native American household income

Each dot represents one reservation. The chart shows 120 reservations of the 121 reservations with household income data. One with exceptionally high income (above $110,000) was excluded to demonstrate the relationship holds across typical income ranges. The upward slope shows that institutional quality correlates with prosperity. The relationship is statistically significant (p = 0.004) and economically meaningful: each additional point on the REFI scale associates with $1,783 higher median household income for Native American residents.

The pattern isn’t driven by extreme cases. Including all 121 observations (with the high-income outlier) yields similar findings (coefficient = $1,600, p = 0.011). The pattern also holds for per capita income measured across all 123 reservations and in log specifications measuring percentage changes, confirming the relationship is robust across different income measures and model specifications.

What REFI 2.0 Measures

The Reservation Economic Freedom Index captures institutional features that economic research consistently links to prosperity. Ten components combine into a single 0-to-13 scale:

Governance and Accountability:

• Constitutional structure that separates powers and limits executive discretion

• Competitive general elections for leadership positions

Property Rights and Legal Framework:

• Percentage of reservation land held in fee simple (not trust status)

• Adoption of Uniform Commercial Code for secured transactions

• Modern land codes governing property use and transfer

• Clear tax codes defining tribal revenue authority

Openness and Transparency:

• Absence of blood quantum requirements for membership

• Public access to tribal codes and regulations

Federal Relationship:

• Self-governance compacts reducing BIA oversight

• Jurisdictional framework (including PL 280 status and tribal-federal agreements)

• Tribal law enforcement authority under federal cooperation agreements

Judicial Quality:

• Published tribal codes and court procedures

• Separate court system (independent judicial branch, not combined with executive)

• Professional judiciary with law degrees and experience

• Judge term lengths that balance independence with accountability

This isn’t a checklist where more is always better. It’s a framework for identifying which institutional features correlate most strongly with economic outcomes. Some components matter more than others. REFI 2.0’s expansion to 123 tribes allows for more precise identification of which reforms drive prosperity.

Building on REFI 1.0

REFI 1.0, published in Public Choice and hosted by Renewing Indigenous Economies at the Hoover Institution, covered 89 tribal nations and established the basic relationship between institutional quality and prosperity. Terry Anderson and the RIE team recognized early that quantifying institutional variation across reservations could inform policy discussions; and the initial results confirmed that intuition.

REFI 2.0 expands coverage to 123 tribal nations and refines measurement of several institutional components based on updated data and tribal policy developments. The core methodology remains consistent while improvements in data collection allow for more precise institutional comparisons across a broader sample of tribal governments.

The expanded coverage reveals the same fundamental pattern REFI 1.0 identified: institutional quality correlates with prosperity. But with 34 additional tribal nations and updated data through 2023, we can now identify these relationships with greater confidence and examine variation across more diverse governance structures.

What the Numbers Show

The statistical relationship between REFI 2.0 and income is clear across multiple measures:

Median household income (Native American residents): Analyzing 121 reservations with available household income data, each 1-point REFI increase correlates with $1,783 higher income (statistically significant at p = 0.004). This result is based on 120 observations after excluding three reservations with exceptionally high incomes; including all 121 observations yields similar findings (coefficient = $1,600, p = 0.011).

Per capita income (Native American residents): The pattern holds here as well, with each REFI point associating with roughly $900 higher per capita income (p < 0.001).

Percentage terms: In log specifications measuring proportional changes, a 1-point REFI improvement associates with approximately 3.5% higher household income—confirming the relationship holds across different income levels.

Consistency matters. The pattern appears regardless of how we measure income (household vs. per capita), how we specify the model (levels vs. logs), or which observations we include. That consistency suggests we’re measuring something real: institutional quality shapes economic outcomes.

To put these numbers in perspective: a 3-point institutional improvement, say, moving from weak property rights enforcement to clear, enforceable titles, or from discretionary permitting to rule-based processes, correlates with over $5,000 higher median household income. Moving from the bottom quartile to the top quartile of institutional quality? The data suggest a difference of tens of thousands of dollars per household.

What This Means for Policy

These correlations don’t prove that changing any single institutional feature will automatically raise incomes. Causation is more complicated; better institutions may attract different residents, enable different economic activities, or reflect other unobserved factors that also drive prosperity. Research using natural experiments and institutional changes over time (work my colleagues and I continue to pursue) provides stronger causal evidence.

But correlation still tells us something useful for policy: institutional quality and prosperity move together. Reservations with clear property rights, predictable regulations, strong courts, and high economic freedom systematically have higher household incomes than those with ambiguous ownership, discretionary processes, and constrained economic activity.

The policy implication: reforms that improve institutional quality, clearer property rights, more predictable regulatory processes, stronger judicial independence, and reduced federal oversight where tribes can self-govern effectively, are worth pursuing. The data can’t tell us the exact causal effect of any single reform, but they can identify which margins show the strongest associations with prosperity.

For tribal leaders evaluating reform priorities, REFI 2.0 provides a framework: which institutional features show the strongest correlation with economic outcomes? For federal policymakers considering legislative changes, the data suggest: removing barriers to tribal institutional development, such as trust status restrictions, overlapping jurisdictions, and regulatory uncertainty, would likely support prosperity.

The Federal Barrier Question

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.

When REFI scores are low, it often reflects federal constraints on tribal sovereignty, not tribal governance failures. The correlation between REFI and prosperity, therefore, suggests that removing federal barriers to tribal self-governance could support economic development. This aligns with decades of research by the Harvard Project on American Indian Economic Development showing that genuine self-determination, not federal administration, drives reservation prosperity.

The challenge is that improving REFI scores requires either federal legislative reform (to remove barriers like trust status or jurisdictional complexity) or tribal institutional development within existing constraints (adopting modern codes, strengthening courts, increasing transparency). Both paths are available; both show up in the data as associated with higher incomes.

What Comes Next

REFI 2.0 is a measurement tool, not a policy prescription. It shows which institutional features correlate with prosperity across 123 tribal nations. The question for tribal leaders and federal policymakers is: which reforms are feasible, which are most urgent, and which would deliver the greatest benefit?

That’s where the research goes next. Identifying causal effects through natural experiments. Examining which specific institutional changes drive the strongest income gains. Understanding how different components interact. Does judicial quality matter more when property rights are already clear? Do regulatory reforms work better with or without federal oversight?

The data are available for researchers, tribal governments, and policymakers who want to examine specific questions. REFI 2.0 provides the baseline measurement. The policy work—figuring out which reforms to pursue and how to implement them—is where institutional economics meets the practical challenges of governance in Indian Country.

For tribal nations considering institutional reforms, the message is straightforward: institutional quality matters. Not in theory, not in abstract economic models, but in measurable household incomes across 123 reservations. The data show it. The question is what to do about it.

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Data and Methods Note

REFI 2.0 institutional data were collected in early 2025. Income data come from the American Community Survey 2019-2023 five-year estimates for Native American residents on reservations. The sample includes 123 federally recognized tribal nations in the lower 48 states with sufficient ACS sample sizes for reliable income estimates.

The relationship holds in both level and log specifications, for both household and per capita income measures, and across different sample compositions. Correlation does not establish causation. These results show that institutional quality and prosperity move together across reservations. Causal identification requires additional empirical strategies, such as difference-in-differences analysis of institutional changes, instrumental variables approaches, or natural experiments, remain active areas of research.

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A Note on Collaboration

REFI 1.0 benefited from support by the Mercatus Center, the Public Choice Center, and Renewing Indigenous Economies at the Hoover Institution. Terry Anderson and the RIE team recognized early that quantifying institutional variation across reservations could inform policy discussions, while Mercatus and the Public Choice Center at George Mason University supported the work as part of their research programs on institutions and prosperity.

REFI 2.0 received support from the Institute for Humane Studies at George Mason University. I’m grateful to all four organizations for their support of this research program and committed to making REFI as useful as possible for tribal leaders evaluating reform options and for federal policymakers considering legislative changes.

REFI 2.0 builds on the REFI 1.0 foundation while expanding reach to policymakers and practitioners through this platform. If your organization works on tribal economic policy, and these data would be useful, I’m happy to discuss collaboration. If you’re a tribal leader with questions about your nation’s REFI score or the methodology, reach out. If you’re a Congressional staffer working on Indian Affairs legislation and this analysis would inform your work, I’m available for background conversations.

The goal is impact, not publication metrics. Institutional economics should serve the people and communities it studies.

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Where to Find More

• REFI 1.0 methodology and findings: Stratmann (2023), “A Reservation Economic Freedom Index,” Public Choice. https://doi.org/10.1007/s11127-023-01088-3

• Renewing Indigenous Economies at Hoover: https://www.hoover.org/renewing-indigenous-economies

• Previous Rules & Results posts on tribal economics: Thirty Years for Tax Clarity, When Tribal Courts Gain Jurisdiction, What Waiting Looks Like