Pro‐market institutions and labor market outcomes: A panel‐data analysis of U.S. metropolitan areas

We expand previous U.S. state‐level research on the relationship between pro‐market institutions and labor market outcomes by examining this relationship at the U.S. metropolitan‐area level. Using panel data for 1992–2012 in a fixed‐effects model, we investigate the effect of pro‐market institutions on the unemployment rate, labor force participation rate, employment‐population ratio, and employment growth across 366 U.S. metropolitan areas. The results indicate that pro‐market institutions are associated with a lower unemployment rate, higher employment‐population ratio, and faster employment growth. These results suggest that local‐area policies are important for achieving favorable labor market conditions at the local level.