The Impact of Regulatory Growth on Operating Costs

26 Pages Posted: 22 Sep 2020

Date Written: August 2020

Abstract

We investigate the effect of recent regulatory growth on operating costs per unit of output across a variety of US industries. Using an Augmented Mean Group estimator approach, we find that regulations in the current year and four to five years prior have statistically significant upward effects on operating costs per unit of output. This suggests that the most pronounced effects of regulations occur when a regulation is passed and when compliance dates arrive. Our results imply that the average level of annual regulatory growth (3.55 percent) increases operating costs per unit of output by 3.3 percentage points per year relative to a baseline of no regulatory growth.

Keywords: regulation, regulatory accumulation, operating costs, augmented mean group estimator

JEL Classification: C23, D24, L51

Suggested Citation

Fullenbaum, Richard and Richards, Tyler, The Impact of Regulatory Growth on Operating Costs (August 2020). Mercatus Working Paper Series, Available at SSRN: https://ssrn.com/abstract=3697453 or http://dx.doi.org/10.2139/ssrn.3697453

Richard Fullenbaum (Contact Author)

United States Naval Academy ( email )

589 McNair Road
Annapolis, MD 21402
United States
410-293-6392 (Phone)

Tyler Richards

Independent ( email )

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