Regulatory Activities of Government: Analysis of Determinants
Zbornik radova Ekonomskog fakulteta u Rijeci, časopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 24, No. 2, 2006, pp. 211-224
13 Pages Posted: 28 May 2013
Date Written: December 22, 2006
International comparisons show that large cross-country differences exist in the overall macro extent of regulation of the economy. In this context, the main purpose of the article is to investigate, why such differences exist by identifying and empirically verifying the effect of various factors that could potentially shape those differences. Empirical analysis based on the sample of 32 developed and democratic countries revealed that almost 70 % of variation in the macro extent of regulation could be explained with 7 statistically significant explanatory variables. The econometric analysis revealed that the macro extent of regulation decreases with income inequality in society, with the level of economic development, with the size of economy, with the share of transfer spending in GDP and with the share of government employment in labour force. On the other hand, the extent of regulation is positively related to government ownership of enterprises and to presidential political regime.
Keywords: regulation, developed countries, cross-country differences, determinants of regulation, econometric analysis
JEL Classification: L51, H10
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