TY - JOUR
T1 - National regulation, state-level policy, and local job creation in the United States
T2 - A multilevel perspective
AU - Lucas, David S.
AU - Boudreaux, Christopher J.
N1 - Funding Information:
The authors are grateful to Editor Maryann Feldman, three anonymous reviewers, seminar participants at the 2019 Babson College Entrepreneurship Research Conference, and seminar participants at the 2019 Academy of Management Conference for their helpful feedback and suggestions.
Publisher Copyright:
© 2020 Elsevier B.V.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2020/5
Y1 - 2020/5
N2 - The relationship between national regulation and job creation remains highly debated. The “public choice” perspective holds that regulation hinders job creation through compliance costs and regulatory capture. Meanwhile, the “public interest” view suggests that regulation can facilitate employment growth by promoting innovation and fair competition. We offer a contingency perspective, i.e., that national regulation's effects vary across heterogeneous state political institutions. Drawing on the political science theory of market-preserving federalism, we argue that state-level economic freedom moderates the effects of national regulation on local net job creation. Using U.S. data, we find support for this moderating hypothesis. National regulation destroys jobs on net in states with low economic freedom. However, national regulation has no effect in states with high economic freedom; this effect holds for tax freedom and labor market freedom. The moderation is concentrated among mature firms rather than young firms, and in metro counties rather than non-metro counties; furthermore, it is robust across multiple regulatory measures and instrumental variables approaches. Our work reveals that state political institutions have an underappreciated influence on the costs of national regulation, demonstrating the interdependence of policies for local economic development.
AB - The relationship between national regulation and job creation remains highly debated. The “public choice” perspective holds that regulation hinders job creation through compliance costs and regulatory capture. Meanwhile, the “public interest” view suggests that regulation can facilitate employment growth by promoting innovation and fair competition. We offer a contingency perspective, i.e., that national regulation's effects vary across heterogeneous state political institutions. Drawing on the political science theory of market-preserving federalism, we argue that state-level economic freedom moderates the effects of national regulation on local net job creation. Using U.S. data, we find support for this moderating hypothesis. National regulation destroys jobs on net in states with low economic freedom. However, national regulation has no effect in states with high economic freedom; this effect holds for tax freedom and labor market freedom. The moderation is concentrated among mature firms rather than young firms, and in metro counties rather than non-metro counties; furthermore, it is robust across multiple regulatory measures and instrumental variables approaches. Our work reveals that state political institutions have an underappreciated influence on the costs of national regulation, demonstrating the interdependence of policies for local economic development.
KW - Economic freedom
KW - Job creation
KW - Market-preserving federalism
KW - Public choice
KW - Public interest
KW - Regulation
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U2 - 10.1016/j.respol.2020.103952
DO - 10.1016/j.respol.2020.103952
M3 - Article
AN - SCOPUS:85081677748
SN - 0048-7333
VL - 49
JO - Research Policy
JF - Research Policy
IS - 4
M1 - 103952
ER -