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Corresponding Author:
Richard J. Cebula, Davis College of Business, Jacksonville University, Jacksonville, Florida, USA

Corresponding Coauthors:
John CONNAUGHTON , University of North Carolina Charlotte, North Carolina, USA
Caroline SWARTZ, University of North Carolina Charlotte, North Carolina, USA

Factors Influencing Inter-regional Living-Cost Differentials: Panel Data Analysis for the Case of the U.S.

(pp. 281-300)
JEL classification: R11, R20, R22, R29
Keywords: Interstate Living-Cost Differentials, Labor Market Freedom, Income, Population Size, Demographic Traits, Climate

Abstract

This empirical study seeks to identify key factors that have influenced geographic (interstate) living-cost differentials in the U.S. in recent years. However, given the evolving literature on the effects of economic freedom in recent years, unlike previous related studies, there is a focus here on the impact of market freedom, in particular, overall labor market freedom. This study effectively differs from previous related studies in a number of ways, including: (a) the adoption of a state-level panel dataset for estimation purposes that represents the period 2000-2012; (b) studying domestic geographic living-cost differentials through Cross Section Random Effects and other estimations; and (c) formally inquiring expressly whether a higher level of labor market freedom (a factor heretofore effectively ignored in the literature on inter-regional living-cost differentials), by increasing the efficiency of labor market transactions so as to reduce the overall cost of production and/or distribution of goods and services within the state, acts to reduce the overall cost of living in the state. Among other things, the estimations all provide compelling evidence that states with higher levels of overall labor market freedom do have a lower overall cost of living. 


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