TITLE:
US State Economic Freedom and the Labor Supply of Young Workers
AUTHORS:
Jeffrey J. Yankow
KEYWORDS:
Labor Supply, Economic Freedom, Wages, Earnings
JOURNAL NAME:
Modern Economy,
Vol.7 No.7,
July
21,
2016
ABSTRACT: Matching panel data drawn from the National Longitudinal Survey of Youth
1979 to the state-level index of economic freedom published in Economic Freedom of North America 2010,
this study examines the empirical relationship between the degree of economic
freedom in US states and individual labor supply. OLS estimation identifies a
positive correlation between economic freedom and annual hours worked. However,
this relationship disappears when the model accounts for time-invariant
person-specific fixed effects. Although states with higher degrees of economic
freedom appear to generate higher productivity and therefore labor earnings
potential among workers, most workers do not increase their hours of work in
response.