The new research, published in the July issue of the Southern Economic Journal, is the first to analyse how economic freedom affects unemployment.
Based on data from the period 1980-2003, the findings suggest that if Italy had enjoyed the same extent of economic freedom as the United States, its unemployment rate would have been 2.4 percentage points lower among women and 4.2 percentage points lower among young people.
Dr Horst Feldmann from the University of Bath, who carried out the research, used the Economic Freedom of the World index that has been constructed by a worldwide network of economists.
“Economic freedom has already been shown to have a favourable effect on gross domestic product (GDP) per capita, but nobody has analysed its effect on unemployment before,” said Dr Feldmann.
“The study clearly shows that restrictions on economic freedom are likely to involve substantial costs in terms of higher unemployment.”
The study establishes not only the effect on overall unemployment but also the extent to which economic freedom affects unemployment amongst women and young people – two groups that typically have above-average unemployment rates.
Dr Feldmann also analysed how different economic freedoms – which include a small government sector, a strong rule of law, ‘sound’ money, free trade, and a light regulatory burden – influence unemployment, both in the short and long term.
One of the key findings from the study is that a small government sector has beneficial effects on unemployment.
“If Italy’s government sector had been as small as in the United States, its overall unemployment rate would have been 2.3 percentage points lower,” said Dr Feldmann from the University’s Department of Economics & International Development.
“This corroborates theories that suggest that a large government sector crowds out the private sector, reducing the international competitiveness of the relevant economy.
“In addition, high taxes, which are an unavoidable implication of a large government sector, reduce the profitability of private investment.”
One surprising finding to emerge from the research is the link between a strong rule of law and unemployment.
“If Italy had enjoyed the same strength in the rule of law as the United States, its overall unemployment rate would have been 1.4 percentage points lower,” said Dr Feldmann.
“Under the rule of law, people have a strong incentive to be gainfully employed because the income they earn is legally secured.
“Also, businesses have a strong incentive to hire staff because the proceeds resulting from employment are legally secured.
“By contrast, a weak rule of law undermines both people’s incentive to take up gainful employment and enterprises’ incentive to hire workers and innovate.”
Additionally, the research shows that freedom to trade internationally in the longer term results in a fall in unemployment over several years.
Similarly, flexible regulations governing credit, labour and product markets help reduce unemployment over longer periods of time.
Andrew McLaughlin | alfa
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Strong light-matter coupling in these semiconducting tubes may hold the key to electrically pumped lasers
Light-matter quasi-particles can be generated electrically in semiconducting carbon nanotubes. Material scientists and physicists from Heidelberg University...
Fraunhofer IPA has developed a proximity sensor made from silicone and carbon nanotubes (CNT) which detects objects and determines their position. The materials and printing process used mean that the sensor is extremely flexible, economical and can be used for large surfaces. Industry and research partners can use and further develop this innovation straight away.
At first glance, the proximity sensor appears to be nothing special: a thin, elastic layer of silicone onto which black square surfaces are printed, but these...
3-D shape acquisition using water displacement as the shape sensor for the reconstruction of complex objects
A global team of computer scientists and engineers have developed an innovative technique that more completely reconstructs challenging 3D objects. An ancient...
Physicists have developed a new technique that uses electrical voltages to control the electron spin on a chip. The newly-developed method provides protection from spin decay, meaning that the contained information can be maintained and transmitted over comparatively large distances, as has been demonstrated by a team from the University of Basel’s Department of Physics and the Swiss Nanoscience Institute. The results have been published in Physical Review X.
For several years, researchers have been trying to use the spin of an electron to store and transmit information. The spin of each electron is always coupled...
What is the mass of a proton? Scientists from Germany and Japan successfully did an important step towards the most exact knowledge of this fundamental constant. By means of precision measurements on a single proton, they could improve the precision by a factor of three and also correct the existing value.
To determine the mass of a single proton still more accurate – a group of physicists led by Klaus Blaum and Sven Sturm of the Max Planck Institute for Nuclear...
21.07.2017 | Event News
19.07.2017 | Event News
12.07.2017 | Event News
25.07.2017 | Physics and Astronomy
25.07.2017 | Earth Sciences
25.07.2017 | Life Sciences