![]() ![]() The peak-to-trough period was less than a year for cities such as Austin and San Antonio, while the other cities suffered declines for much longer (e.g., Richmond and Memphis). ( 2016) find that while the Great Recession had a negative impact across all cities, some MSAs experienced a relatively brief downturn. In a similar vein, when comparing the length of recent recessions across the 50 largest metropolitan statistical areas (MSAs), Arias et al. ( 2018) find that rural areas experienced a milder recession with a slower recovery than urban areas. While the entire country felt the negative fallout from the Great Recession, the impact and subsequent recovery was not homogenous across areas. This lackluster performance has led to a large literature examining the federal and monetary policies (or lack thereof) that could explain such an anemic recovery (Taylor 2014 Verick and Islam 2010 Wynne 2011). Unemployment rates remained above pre-recession levels through 2016 (Cunningham 2018) and real GDP did not return to pre-crisis levels until 2011 (Blinder 2015). When compared to the recession of the early 1980s, the peak-to-trough decline in real GDP was 2% points lower with even more substantial declines when looking at payroll employment (Blinder 2015). The Great Recession was the worst economic crisis to hit the United States since the Great Depression. Overall, our findings suggest that economic freedom did “lighten the blow” from the Great Recession. We supplement these findings with a matching analysis where we find that MSAs that experienced meaningful increases in economic freedom in the five-year period before the Great Recession (2002–2007) had quicker recoveries – in terms of unemployment rates and income – than their matched counterfactuals from 2007 to 2012. This holds true even when examining a cross-section of MSAs using data from the crisis period alone. Using a panel dataset of 382 MSAs from 2002 to 2012, we find that economic freedom is associated with enhanced economic outcomes – lower unemployment rates, more employment per 100 persons, and higher income per capita. ![]() We use the Stansel ( 2013 2019) MSA-level economic freedom index to analyze the relationship between institutional quality and economic outcomes throughout the crisis period. Our paper examines the role of economic freedom in explaining these differences at the metropolitan statistical area (MSA) level. ![]() The Great Recession led to a large decline in economic activity throughout the entire United States with significant variation in its severity across regions. ![]()
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