Measuring Regulation

40 Pages Posted: 30 Jun 2018

See all articles by Michael Simkovic

Michael Simkovic

University of Southern California Gould School of Law; University of Southern California - Marshall School of Business

Miao Ben Zhang

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: June 29, 2018

Abstract

This paper uses occupational employment and wage data for over 270 industries from 1990 to 2017 to estimate the percentage of an industry’s annual labor costs paid to perform regulation-related tasks. We hypothesize that this measure reflects the intensity of regulations that incentivize firm spending on compliance to avoid legal liability or regulatory sanctions. We study the sensitivity of this measure to shocks that in- crease or decrease regulatory intensity in the finance and energy sectors. Compared to text-based measures that count words in regulations, our Regulation Index reflects broader sources of regulation, can better detect the impact of regulations, and can better distinguish deregulation from increased regulation. Our measure is highly correlated with industry’s outsourced legal spending but offers more granular estimates for a larger number of industries with less cyclical variation in spending.

A PowerPoint presentation of this paper is available at http://ssrn.com/abstract=3215032.

Keywords: Regulation, Deregulation, measurement, Dodd Frank, Compliance, Lawyers, Legal Market, Rules, RegData, CFR, U.S. Code, Financial Crisis, Financial Regulation, Index, Regulatory Index

JEL Classification: B4, C1, C43, C81, D2, D61, G01, G18,G2, G28, G38, H7, H1, K2, L5

Suggested Citation

Simkovic, Michael and Zhang, Miao Ben, Measuring Regulation (June 29, 2018). Available at SSRN: https://ssrn.com/abstract=3205589 or http://dx.doi.org/10.2139/ssrn.3205589

Michael Simkovic (Contact Author)

University of Southern California Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Miao Ben Zhang

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

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

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