The impact of labor freedom on geographic cost of living differentials. Controlling for economic and quality of life factors, 2016
| DOI | https://doi.org/10.1108/JEPP-D-17-00015 |
| Published date | 06 November 2017 |
| Pages | 385-395 |
| Date | 06 November 2017 |
| Author | Richard Cebula,James E. Payne,Donnie Horner,Robert Boylan |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
The impact of labor freedom
on geographic cost of
living differentials
Controlling for economic and
quality of life factors, 2016
Richard Cebula
Jacksonville University, Jacksonville, Florida, USA
James E. Payne
Benedictine University, Lisle, Illinois, USA, and
Donnie Horner and Robert Boylan
Jacksonville University, Jacksonville, Florida, USA
Abstract
Purpose –The purpose of this paper is to examine the impact of labor market freedom on state-level cost of
living differentials in the USA using cross-sectional data for 2016 after allowing for the impacts of economic
and quality of life factors.
Design/methodology/approach –The study uses two-stage least squares estimation controlling for
factors contributing to cost of living differences across states.
Findings –The results reveal that an increase in labor market freedom reduces the overall cost of living.
Research limitations/implications –The study can be extended using panel data and alternative
measures of labor market freedom.
Practical implications –In general, the finding that less intrusive government and greater labor freedom
are associated with a reduced cost of living should not be surprising. This is because less government
intrusion and greater labor freedom both inherently allow markets to be more efficient in the rationalization of
and interplay with forces of supply and demand.
Social implications –The findings of this and future related studies could prove very useful to policy
makers and entrepreneurs, as well as small business owners and public corporationsof all sizes –particularly
those considering either location in, relocation to, or expansion into other markets within the USA.
Furthermore, the potential benefits of the National Right-to-Work Law currently under consideration in
Congress could add cost of living reductions to the debate.
Originality/value –The authors extend the literature on cost of living differentials by investigating whether
higher amountsof state-level labormarket freedom act to reducethe states’cost of living using the most recent
annual data available (2016). That labor freedom has a systemic efficiency impact on the state-level cost of living
is a significant finding. In our opinion, it is likely that labor market freedom is increasing the efficiency of labor
markettransactionsin the production anddistribution ofgoods and services,and acts to reducethe cost of living
in states. In addition, unlike previous related studies, the authors investigate the impact of not only overall labor
market freedom on the state-level cost of living, but also how the three sub-indices of labor market freedom, as
identifiedand measured by Stansel et al.(2014, 2015), impact the cost ofliving state by state.
Keywords Cost of living, Economic factors, Labor market freedom, Quality of life factors
Paper type Research paper
1. Introduction
There is a rich literature that addresses the factors influencing geographic differences in a
variety of economic variables across the USA, including income levels and unemployment
rates as well as the convergence or non-convergence of these variables over time
(Partridge et al., 1996; Christopoulos and Tsionas, 2007; James and Moeller, 2013; James and
Campbell, 2016; Connaughton and Swartz, 2015; Walden, 2012). Although certainly not the
most widely studied such variable, geographic differentials in the overall cost of living in the
USA, motivated by economic and as well as public policy considerations, have nevertheless
Journal of Entrepreneurship and
Public Policy
Vol. 6 No. 3, 2017
pp. 385-395
© Emerald PublishingLimited
2045-2101
DOI 10.1108/JEPP-D-17-00015
Received 18 August 2017
Revised 31 August 2017
Accepted 1 September 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
385
Impact of
labor freedom
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