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Do Regional Differentials in Economic Freedom Yield Regional Unemployment Rate Differentials in the U.S.? A Brief Exploratory Note Adopting Panel Data Analysis

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  • Richard J. Cebula

    (Davis College of Business, Jacksonville University, 2800 University Boulevard N, Jacksonville, FL 32211 U. S. A; dr.richardcebula@gmail.com.)

Abstract

This study empirically investigates the hypothesis that the higher the degree of economic freedom in a state, the lower the unemployment rate in that state, other thing held the same. This hypothesis is based on the principle that greater economic freedom leads to greater real economic growth, which in turn reduces the unemployment rate. The framework studied consists of a panel dataset for the 50 U.S. states representing the period 2000 to 2012, a period which includes the Great Recession, as well as years prior to and following the Great Recession. The model estimated in this study includes for each state, in addition to a measure/index of overall economic freedom, control variables for the percentage of the population that is black, the percentage of the population that is Hispanic/Latin, the female labor force participation rate, and the percent of the population (age 25 and older) with at least a high school diploma. A number of state fixed-effects and dynamic panel data estimations are provided, all of which yield the finding that the greater the level of overall economic freedom, the lower the unemployment rate.

Suggested Citation

  • Richard J. Cebula, 2016. "Do Regional Differentials in Economic Freedom Yield Regional Unemployment Rate Differentials in the U.S.? A Brief Exploratory Note Adopting Panel Data Analysis," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 3(1), pages 11-25.
  • Handle: RePEc:bmo:bmoart:v:3:y:2016:i:1:p:11-25
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    References listed on IDEAS

    as
    1. Cebula, Richard J. & Clark, J.R. & Mixon, Franklin G., Jr., 2013. "The Impact of Economic Freedom on Per Capita Real GDP: A Study of OECD Nations," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
    2. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
    3. Lauren R. Heller & E. Frank Stephenson, 2014. "Economic Freedom And Labor Market Conditions: Evidence From The States," Contemporary Economic Policy, Western Economic Association International, vol. 32(1), pages 56-66, January.
    4. Arora, Vivek & Vamvakidis, Athanasios, 2006. "The Impact of U.S. Economic Growth on the Rest of the World: How Much Does It Matter?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 21-39.
    5. Belasen, Ariel R. & Hafer, R.W., 2013. "Do Changes in Economic Freedom affect Well-Being?," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
    6. J. R. Clark & Robert A. Lawson, 2008. "The Impact of Economic Growth, Tax Policy and Economic Freedom on Income Inequality," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 24(Fall 2008), pages 23-31.
    7. Heckelman, Jac C & Stroup, Michael D, 2000. "Which Economic Freedoms Contribute to Growth?," Kyklos, Wiley Blackwell, vol. 53(4), pages 527-544.
    8. Stansel, Dean B., 2013. "An Economic Freedom Index for U.S. Metropolitan Areas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
    9. Richard J. Cebula & Joshua Hall & Franklin G. Mixon Jr & James E. Payne (ed.), 2015. "Economic Behavior, Economic Freedom, and Entrepreneurship," Books, Edward Elgar Publishing, number 16557, April.
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    11. Deller, Steven C., 2009. "Wages, Rent, Unemployment and Amenities," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(2), pages 1-14.
    12. Ashby, Nathan J. & Bueno, Avilia & Martinez, Deborah, 2015. "Economic Freedom and Economic Development in the Mexican States," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(1).
    13. Richard Cebula & Franklin Mixon, 2012. "The Impact of Fiscal and Other Economic Freedoms on Economic Growth: An Empirical Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(2), pages 139-149, May.
    14. Daniel L. Bennet, 2016. "Subnational Economic Freedom and Performance in the United States and Canada," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 165-185, Winter.
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    More about this item

    Keywords

    State unemployment rate; economic freedom.;

    JEL classification:

    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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