Questioning the economic impact of HJR 3

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Questioning the economic impact of HJR 3


New regression analysis from a local sociology prof suggests that the economic performance of Great Lakes states with statutes or constitutional amendments banning same-sex marriage lags behind those without restrictions.

The findings, compiled by Jeramy Townsley, an adjunct professor with IUPUI's Department of Sociology, call into question the data proponents of HJR 3 used to win support of Indiana House Republicans — and offer statistical backing to anecdotal stories of job loss from HJR 3 opponents.

"When I went to the testimonies during the Elections Committee meetings at the House, I was surprised that neither Lilly nor Cummins nor the Chamber (of Commerce) had data to support their assertions that there was job loss," Townsley said. So he set out to see: 1) If he could chart an economic effect related to constitutional amendments and statutes mandating heterosexual marriage definitions; 2) Was it statistically significant; 3) Which direction such policies drove states' economic performance.

Using what stats folk refer to as "panel data, time-series regression" relating four different economic measures to "anti-gay" legislative and court events in nine Midwestern states (plus a separate analysis comparing the jobs and business numbers to a combination measure factoring in "anti-gay events" and real gross domestic product per capita), Townsley found statistically significant evidence that "each anti-gay event leads to a negative impact on firms and the economy, often at the 99.9 percent confidence level, and at the cost of thousands of firms per anti-gay event per state."

He scored the major "anti-gay events" per state over the decade in question, with the passage of a restrictive marriage law, for instance, counting for two points and the proposal of an "anti-gay law" counting for one. Sector-level firm loss relating to "anti-gay events" was not statistically significant until two to three years after an "anti-gay event", but "total firms are impacted the immediate year after the legislative/court events." Townsley also found such events to have a negative impact on the number of jobs and the average real gross domestic product per capita. "For every major anti-gay event," he wrote, "there is a measurable loss of 963 firms the first year out, a loss of 2,104 firms the second year out, and the third and fourth year have a loss of over 3,000 firms."

He concluded that, for legislative leaders who have emphasized job growth as their primary concern, "it seems unreasonable for the state assembly to pursue this divisive bill, that will undoubtedly hurt jobs growth in Indiana."

Some important caveats must be noted: Townsley's study has yet to be published in a peer-reviewed journal or replicated by other social scientists. The most important question facing him at this point is whether future researchers could replicate his work. Though not included with his initial paper, Townsley is willing to share his data and queries. He provided them to NUVO upon request and said he will post them online with his study. [Email for more info.]

While rigorous peer-review remains to be done, the logic behind Townsley's approach is "pretty solid," said Bill Rieber, a professor of economics at Butler University, after a review of the paper. "It is suggestive and something to consider going forward."

Employers tend to value the qualifications and abilities of their employees more than their sexual orientation, Rieber said, noting that it is not unreasonable to suggest that states with legislation perceived to be discriminatory might limit the pool of qualified employees interested in working within their borders.

A query seeking initial critique and response to the study from a listserv of journalists specializing in data analysis yielded input that future explorations of Townsley's work must address.

A grad student in econometrics offered several critical points for consideration: First, Townsley's definitions of statistical significance look OK, but he needs additional work to prove claims of "robust" significance. [Townsley updated his data posted online to address that concern.] The second critique focuses on how the recession affected the results shown across the region. Rieber and Townsley both said it could be justifiable to exclude factoring in recession effects, but that someone could build a more complex economic model to test for recessionary effects. Finally, there is an issue of distinguishing endogenous versus exogenous effects, which is always a matter of debate and often involves pondering such chicken-and-egg quandaries as: Do jobs affect GDP or does GDP affect jobs?

Professor Rieber acknowledged such criticisms are valid.

"You can't control for everything, but it's nice to control for as much as possible," he said.

For his part, Townsley started his series of queries as a personal experiment to evaluate the debate he heard at the Statehouse, using economists' tools to inform local debate as well as to help him tie quantitative data to social theory relating to Richard Florida's "The Rise of the Creative Class."

And, as he thinks about possibility publishing his work, Townsley is subjecting his data to various tests that will help him refine his approach, but nothing in this process so far has yielded results that call into question his primary findings that "anti-gay" policies are associated with negative economic affects. Still, he said, the opportunity exists from an economist to embrace the process of statistical model specification, which could build on the preliminary assertions outlined in Townsley's approach — and build in additional variables to see at what point, if any, they would wash out the effects Townsley identified in his initial effort.

The Indiana State Senate, which is currently set to consider HJR 3 in a Feb. 10 rules committee hearing, and Freedom Indiana, which lobbies against HJR 3, have yet to to respond to questions on the subject.

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