Measuring Regulation

48 Pages Posted: 30 Jun 2018 Last revised: 3 Jul 2019

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: July 1, 2019

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 change 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 regulation. Using microdata, our methodology can also detect increases in regulatory intensity for publicly traded firms relative to privately held firms within an industry following the Sarbanes-Oxley Act of 2002.

Keywords: Regulation, Deregulation, Dodd-Frank, Sarbanes-Oxley, Compliance, RegData, 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 (July 1, 2019). 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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