Regulation, Entrepreneurship, and Firm Size

46 Pages Posted: 26 Apr 2018

See all articles by Dustin Chambers

Dustin Chambers

Salisbury University - Department of Economics and Finance

Patrick A. McLaughlin

Mercatus Center at George Mason University

Tyler Richards

George Mason University - Mercatus Center

Date Written: April 26, 2018

Abstract

We investigate whether regulatory growth disproportionately burdens small businesses relative to large businesses. Using panel data from RegData 3.0 and exploiting variation across industries over time, we empirically estimate the relationship between regulatory growth and growth in the number of small and large firms. Controlling for other factors, we find that a 10 percent increase in regulatory restrictions on a particular industry is associated with a reduction in the total number of small firms within that industry by about 0.5 percent, while simultaneously having no statistically significant association with the number of large firms in that industry. We also find that these magnitudes are amplified when this regulatory growth follows previous years of high regulatory growth, implying that unrelenting regulatory increases harm small businesses at an escalating rate.

Keywords: entrepreneurship, regulation, regulatory accumulation, small business, firm size, industry concentration

JEL Classification: C23, D73, L51

Suggested Citation

Chambers, Dustin and McLaughlin, Patrick A. and Richards, Tyler, Regulation, Entrepreneurship, and Firm Size (April 26, 2018). Mercatus Research Paper, Available at SSRN: https://ssrn.com/abstract=3169332 or http://dx.doi.org/10.2139/ssrn.3169332

Dustin Chambers (Contact Author)

Salisbury University - Department of Economics and Finance ( email )

Salisbury, MD 21801
United States

Patrick A. McLaughlin

Mercatus Center at George Mason University ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
(703) 993-9670 (Phone)

HOME PAGE: http://www.patrickamclaughlin.com

Tyler Richards

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

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