Right-to-work Laws and Manufacturing Employment: The Importance of Spatial Dependence

Using 2000 decennial census data, we estimate the relationships between right-to-work (RTW) laws and employment in manufacturing and other industries. Estimates that do not account for geographically correlated omitted factors dramatically overstate the positive relationship between RTW legislation and manufacturing employment. We estimate that RTW legislation is associated with an increase in manufacturing's share of private wage and salary employment of 2.12%, an estimate almost 30% lower than the estimate that does not control for these spatially correlated omitted factors. Results for other industries indicate that RTW legislation is negatively associated with employment shares in the agriculture, forestry, fishing and hunting, and mining industries and some service industries, but is positively associated with employment shares in the information and professional, scientific, management, administrative, and waste management services industries. Improperly controlling for geographic factors can lead to incorrect inferences and misinform policy.