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Labor market freedom and geographic differentials in the percentage unemployment rate in the U.S

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  • Richard J. Cebula

    (Jacksonville University)

Abstract

The present paper statistically examines whether it can be inferred that the greater the labor market freedom in an environment, the lower the unemployment rate in that environment, other things held the same. The hypothesis is predicated on the tenet that enhanced labor market freedom in a state leads to a more efficiently operating labor market and thereby diminishes the unemployment rate in the state. The empirical context is a panel dataset for all states in the U.S. The study period begins with the year 2008 and runs through the end of the year 2016. This nine-year time frame integrates the entirety of the Great Recession and more than 6 years thereafter. The study includes a number of control variables. The findings strongly support the hypothesis that the unemployment rate is a decreasing function of labor market freedom, whether expressed in the form of its three sub-indices or in the form of the arithmetic mean of those three sub-indices. Potential state-level public policy implications of the findings are also provided and discussed in this study.

Suggested Citation

  • Richard J. Cebula, 2019. "Labor market freedom and geographic differentials in the percentage unemployment rate in the U.S," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(4), pages 828-840, October.
    • Handle: RePEc:spr:jecfin:v:43:y:2019:i:4:d:10.1007_s12197-019-09487-3
    DOI: 10.1007/s12197-019-09487-3
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    References listed on IDEAS

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    1. Paul K. Gatons & Richard J. Cebula, 1972. "Wage-Rate Analysis: Differentials and Indeterminacy," ILR Review, Cornell University, ILR School, vol. 25(2), pages 207-212, January.
    2. Riddell, W. Craig & Song, Xueda, 2011. "The impact of education on unemployment incidence and re-employment success: Evidence from the U.S. labour market," Labour Economics, Elsevier, vol. 18(4), pages 453-463, August.
    3. Doucouliagos, Chris & Ulubasoglu, Mehmet Ali, 2006. "Economic freedom and economic growth: Does specification make a difference?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 60-81, March.
    4. Congsheng Wu, 2011. "Economic Freedom, Economic Growth, and China," Chinese Economy, Taylor & Francis Journals, vol. 44(5), pages 104-119, September.
    5. Aziz N. Berdiev & James W. Saunoris & Friedrich Schneider, 2018. "Give Me Liberty, or I Will Produce Underground: Effects of Economic Freedom on the Shadow Economy," Southern Economic Journal, John Wiley & Sons, vol. 85(2), pages 537-562, October.
    6. Ashenfelter, Orley & Ham, John, 1979. "Education, Unemployment, and Earnings," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 99-116, October.
    7. Lowell E. Gallaway & Richard J. Cebula, 1973. "Differentials and Indeterminacy in Wage Rate Analysis: An Empirical Note," ILR Review, Cornell University, ILR School, vol. 26(3), pages 991-995, April.
    8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    9. repec:pri:indrel:dsp01fb494841t is not listed on IDEAS
    10. 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.
    11. Christopher K. Coombs & Richard Cebula, 2011. "The Impact of Union Corruption on Union Membership," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(1), pages 131-148, January.
    12. Richard J. Cebula, 1989. "The Analysis of Geographic Living-Cost Differentials: A Brief Empirical Note," Land Economics, University of Wisconsin Press, vol. 65(1), pages 64-67.
    13. Richard J. Cebula, 2011. "Economic Growth, Ten Forms of Economic Freedom, and Political Stability: An Empirical Study Using Panel Data, 2003–2007," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 26(Spring 20), pages 61-81.
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