Journal of Economic Growth

, Volume 18, Issue 2, pp 137–177

Federal regulation and aggregate economic growth

Article

Abstract

We introduce a new time series measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that produce it—total factor productivity (TFP), physical capital, and labor. Regulation has caused substantial reductions in the growth rates of both output and TFP and has had effects on the trends in capital and labor that vary over time in both sign and magnitude. Regulation also affects deviations about the trends in output and its factors of production, and the effects differ across dependent variables. Regulation changes the way output is produced by changing the mix of inputs. Changes in regulation offer a straightforward explanation for the productivity slowdown of the 1970s. Qualitatively and quantitatively, our results agree with those obtained from cross-section and panel measures of regulation using cross-country data.

Keywords

Regulation Macroeconomic performance Economic growth  Productivity slowdown 

JEL classification

E20 L50 O40 

Supplementary material

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsAppalachian State UniversityBooneUSA
  2. 2.Department of EconomicsNorth Carolina State UniversityRaleighUSA

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