Economic freedom, homeownership, and state labor market conditions
| Date | 17 August 2015 |
| DOI | https://doi.org/10.1108/JEPP-06-2014-0026 |
| Pages | 142-151 |
| Published date | 17 August 2015 |
| Author | Lauren R. Heller,E. Frank Stephenson |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Economic freedom,
homeownership, and state
labor market conditions
Lauren R. Heller and E. Frank Stephenson
Department of Economics, Berry College, Mount Berry, Georgia, USA
Abstract
Purpose –The purpose of this paper is to reconcile research finding that labor market outcomes
are related to economic freedom for entrepreneurs and separate research finding that higher
homeownership rates are associated with more unemployment.
Design/methodology/approach –Using panel data covering the 50 states over 1981-2009,
this paper analyzes the relationship between labor market conditions, economic freedom, and
homeownership rates.
Findings –The results indicate that economic freedom is associated with favorable labor market
conditions but that the relationship between homeownership and poor labor market outcomes is
small and insignificant in most specifications once economic freedom is accounted for.
Originality/value –This paper is the first paper to examine the relationship between labor market
outcomes and both homeownership and economic freedom. The results suggest that the economic
environment for entrepreneurs is more important than any rigidities created by homeownership.
Keywords Economic freedom, Homeownership, Labour market outcomes
Paper type Research paper
Introduction
Labor market conditions vary considerably across the USA. For example, in February
2014 (the most recent month available at the time of writing), state unemployment rates
ranged from 2.6 percent in North Dakota to 9.0 percent in Rhode Island. Obviously,
such differences are partly attributable to demographics or other factors outside
the policy realm; for example, many people retire to the warm climates of Florida and
Arizona. However, knowing what role, if any, policy plays in such large differences
is potentially important for improving people’s economic well-being.
There is abundant research finding that policies conducive to entrepreneurship are
related to economic outcomes. For example, after controlling for a variety of state-level
characteristics, Heller and Stephenson (2014) find that differences in state labor market
conditions are correlated with economic freedom, that is, with the tax, spending, and
labor market policies confronting entrepreneurs. Their finding that the size of government
and the structure of taxation are more important than labor market policies per se is
particularly suggestive that policies affecting new enterprises created by entrepreneurs
plays a crucial role in explaining cross-state labor market conditions. Other papers whose
findings point toward the importance of entrepreneurship conducive policies in explaining
variation in economic outcomes include Kreft and Sobel (2005), Campbell et al. (2007-2008),
and Campbell and Rogers (2007).
However, a separate line of research, dating to Oswald (1996) and including
Blanchflower and Oswald (2013), suggests that high homeownership rates play a role in
state labor market conditions. This idea, which has come to be known as the Oswald
hypothesis, posits that homeownership increases unemployment by reducing labor
mobility[1]. Unfortunately, this stream of research ignores any potential role for
Journal of Entrepreneurship and
Public Policy
Vol. 4 No. 2, 2015
pp. 142-151
©Emerald Group Publishing Limited
2045-2101
DOI 10.1108/JEPP-06-2014-0026
Received 20 June 2014
Revised 7 August 2014
Accepted 10 August 2014
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
142
JEPP
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