Regulatory Expenditures, Economic Growth and Jobs: An Empirical Study

Phoenix Center Policy Bulletin, No. 28

20 Pages Posted: 6 May 2011 Last revised: 4 Aug 2011

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Hyeongwoo Kim

Auburn University

Lawrence J. Spiwak

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: April 1, 2011

Abstract

With a sluggish economy, high unemployment, and unprecedented deficit spending, growing the economy and curbing federal spending are top priorities in Washington. A now-popular target for reform is regulation, which even President Obama claims to have "stifled innovation" and to have had "a chilling effect on growth and jobs." In this POLICY BULLETIN, we use fifty years of data and modern econometric methods to provide an estimate of the relationship between government spending on regulatory activity and economic growth and job recovery. We estimate that reducing the size of the regulatory bureaucracy may grow the economy and invigorate the labor market. Even a small 5% reduction in the regulatory budget (about $2.8 billion) is estimated to result in about $75 billion in expanded private-sector GDP each year, with an increase in employment by 1.2 million jobs annually. On average, eliminating the job of a single regulator grows the American economy by $6.2 million and nearly 100 private sector jobs annually. Conversely, each million dollar increase in the regulatory budget costs the economy 420 private sector jobs. Accordingly, as Congress and the President struggle with the difficult decisions of how to shrink federal spending, an excellent place to start would be to investigate responsible cuts in the size of the federal regulatory budget. That said, while regulation imposes costs, regulation may also have social benefits, and this fact should be considered.

Keywords: Regulation, Cost of Regulation, Jobs, Employment, Government, Budget, Deficit

JEL Classification: C32, E2, E62, H5, H6, L51

Suggested Citation

Beard, Thomas Randolph and Ford, George S. and Kim, Hyeongwoo and Spiwak, Lawrence J., Regulatory Expenditures, Economic Growth and Jobs: An Empirical Study (April 1, 2011). Phoenix Center Policy Bulletin, No. 28. Available at SSRN: https://ssrn.com/abstract=1831654 or http://dx.doi.org/10.2139/ssrn.1831654

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Hyeongwoo Kim

Auburn University ( email )

Department of Economics
Auburn, AL 36849
United States
+1-334-844-2928 (Phone)

HOME PAGE: http://https://sites.google.com/site/hkimphd/

Lawrence J. Spiwak

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States
202-274-0235 (Phone)
202-318-4909 (Fax)

HOME PAGE: http://www.phoenix-center.org

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