Regulation, Innovation and Productivity

54 Pages Posted: 21 Jul 2010

See all articles by Francisco Marcos

Francisco Marcos

IE Law School

Juan Santaló

Fundación Instituto de Empresa, S.L. - IE Business School

Date Written: July 15, 2010

Abstract

This paper estimates the average effect of regulatory intensity and administrative redtape on productivity and innovation. For this purpose we exploit the exogenous variation of the decentralization process that has taken place in Spain during the last three decades. Using objective proxies for legislative and regulatory activity such as the number of pages and number of new norms published in the regional legislative reporters we find a strong negative impact of regulatory intensity on regional innovation and productivity. This negative effect of regional regulation is not only statistically significant but also of large economic importance and can explain the absence of productivity growth of Spain in the last decades. Finally, we provide evidence that regulatory intensity has affected the size distribution of establishment reducing its skewness and therefore affecting asymmetrically more those establishments that are more likely to innovate.

Keywords: Regulation, Regulatory Burden, Decentralization, Self-Governing Communities, Regions, Federalism, Economic Development, Innovation, Productivity, Spain

JEL Classification: D24, H73, H77, K20, 031, 047, 052, R50

Suggested Citation

Marcos, Francisco and Santalo, Juan, Regulation, Innovation and Productivity (July 15, 2010). Instituto de Empresa Business School Working Paper No. 10-04. Available at SSRN: https://ssrn.com/abstract=1645936 or http://dx.doi.org/10.2139/ssrn.1645936

Francisco Marcos (Contact Author)

IE Law School ( email )

Castellón de la Plana 8
Madrid, Madrid 28006
Spain

Juan Santalo

Fundación Instituto de Empresa, S.L. - IE Business School ( email )

Calle Maria de Molina 12, Bajo
Madrid
Spain

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