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
Plants and algae use the enzyme Rubisco to fix carbon dioxide, removing it from the atmosphere and converting it into biomass. Algae have figured out a way to increase the efficiency of carbon fixation. They gather most of their Rubisco into a ball-shaped microcompartment called the pyrenoid, which they flood with a high local concentration of carbon dioxide. A team of scientists at Princeton University, the Carnegie Institution for Science, Stanford University and the Max Plank Institute of Biochemistry have unravelled the mysteries of how the pyrenoid is assembled. These insights can help to engineer crops that remove more carbon dioxide from the atmosphere while producing more food.
A warming planet
Our brains house extremely complex neuronal circuits, whose detailed structures are still largely unknown. This is especially true for the so-called cerebral cortex of mammals, where among other things vision, thoughts or spatial orientation are being computed. Here the rules by which nerve cells are connected to each other are only partly understood. A team of scientists around Moritz Helmstaedter at the Frankfiurt Max Planck Institute for Brain Research and Helene Schmidt (Humboldt University in Berlin) have now discovered a surprisingly precise nerve cell connectivity pattern in the part of the cerebral cortex that is responsible for orienting the individual animal or human in space.
The researchers report online in Nature (Schmidt et al., 2017. Axonal synapse sorting in medial entorhinal cortex, DOI: 10.1038/nature24005) that synapses in...
Whispering gallery mode (WGM) resonators are used to make tiny micro-lasers, sensors, switches, routers and other devices. These tiny structures rely on a...
Using ultrafast flashes of laser and x-ray radiation, scientists at the Max Planck Institute of Quantum Optics (Garching, Germany) took snapshots of the briefest electron motion inside a solid material to date. The electron motion lasted only 750 billionths of the billionth of a second before it fainted, setting a new record of human capability to capture ultrafast processes inside solids!
When x-rays shine onto solid materials or large molecules, an electron is pushed away from its original place near the nucleus of the atom, leaving a hole...
For the first time, physicists have successfully imaged spiral magnetic ordering in a multiferroic material. These materials are considered highly promising candidates for future data storage media. The researchers were able to prove their findings using unique quantum sensors that were developed at Basel University and that can analyze electromagnetic fields on the nanometer scale. The results – obtained by scientists from the University of Basel’s Department of Physics, the Swiss Nanoscience Institute, the University of Montpellier and several laboratories from University Paris-Saclay – were recently published in the journal Nature.
Multiferroics are materials that simultaneously react to electric and magnetic fields. These two properties are rarely found together, and their combined...
19.09.2017 | Event News
12.09.2017 | Event News
06.09.2017 | Event News
22.09.2017 | Life Sciences
22.09.2017 | Medical Engineering
22.09.2017 | Physics and Astronomy