Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom: Evidence From the United States

45 Pages Posted: 9 Aug 2018

See all articles by David Lucas

David Lucas

Syracuse University

Christopher Boudreaux

Florida Atlantic University

Date Written: July 19, 2018

Abstract

Regulation has been shown to hinder employment and entrepreneurship, but regional variation is rarely explored. Engaging the theory of market-preserving federalism, we argue that regional economic freedom attenuates the negative influence of national regulation on net job creation. Using U.S. data, we find that regulation destroys jobs on net, but regional economic freedom moderates this effect. In regions with average economic freedom, a one percent increase in regulation results in 14 net jobs destroyed. However, a standard deviation increase in economic freedom attenuates this relationship by four fewer jobs destroyed. This moderation accrues strictly to older firms; regulation usually harms young firm job creation, and economic freedom does not attenuate this relationship.

Keywords: Regulation, Job Creation, Economic Freedom, Market-Preserving Federalism

JEL Classification: L26, L51, P48, R10

Suggested Citation

Lucas, David and Boudreaux, Christopher, Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom: Evidence From the United States (July 19, 2018). Available at SSRN: https://ssrn.com/abstract=3219821 or http://dx.doi.org/10.2139/ssrn.3219821

David Lucas

Syracuse University ( email )

721 University Ave
Syracuse, NY 13244-2130
United States

Christopher Boudreaux (Contact Author)

Florida Atlantic University ( email )

777 Glades Road
KH 145
Boca Raton, FL 33431
United States

HOME PAGE: http://home.fau.edu/cboudreaux/web/

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