The Heterogeneous Effects of Economic Freedom on Labor Market Outcomes

Wall, Howard and Ferrarini, Tawni (2025): The Heterogeneous Effects of Economic Freedom on Labor Market Outcomes.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic freedom, labor market outcomes
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H73 - Interjurisdictional Differentials and Their Effects; J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies; P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics

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