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The Heterogeneous Effects of Economic Freedom on Labor Market Outcomes

Author

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  • Wall, Howard
  • Ferrarini, Tawni

Abstract

This paper shows how economic freedom can have heterogeneous effects on unemployment rates, employment-population ratios, and labor force participation. Our difference-in-difference approach compares counties in metropolitan statistical areas that straddle state borders, isolating own-state effects of economic freedom. Although overall economic freedom does not significantly affect labor market outcomes for the entire population, its effects are diverse and varied according to age, educational attainment, sex, and race. This empirical study also examines the heterogeneous effects of specific areas of economic freedom (government spending, taxation, and labor market regulations), highlighting the complexity of these relationships and suggesting that economic freedom is not a one-size-fits-all policy approach.

Suggested Citation

  • Wall, Howard & Ferrarini, Tawni, 2025. "The Heterogeneous Effects of Economic Freedom on Labor Market Outcomes," MPRA Paper 125191, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:125191
    as

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    File URL: https://mpra.ub.uni-muenchen.de/125191/1/MPRA_paper_125191.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Murphy, Ryan H., 2016. "Economic freedom of North America at state borders 1," Journal of Institutional Economics, Cambridge University Press, vol. 12(4), pages 885-893, December.
    3. Stansel, Dean & Tuszynski, Meg Patrick, 2017. "Sub-National Economic Freedom: A Review and Analysis of the Literature," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 48(01), October.
    4. Stansel, Dean, 2019. "Economic Freedom in U.S. Metropolitan Areas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 49(01), March.
    5. 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.
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    More about this item

    Keywords

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    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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