Federal Regulation and Aggregate Economic Growth

49 Pages Posted: 25 Feb 2013

See all articles by John W. Dawson

John W. Dawson

Appalachian State University - Department of Economics

John J. Seater

Economics Dept., Boston College

Date Written: January 1, 2013

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

Suggested Citation

Dawson, John W. and Seater, John J., Federal Regulation and Aggregate Economic Growth (January 1, 2013). Journal of Economical Growth, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2223315

John W. Dawson

Appalachian State University - Department of Economics ( email )

Boone, NC 28608
United States

John J. Seater (Contact Author)

Economics Dept., Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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