Regulation and Economic Growth: Evidence from British Columbia’s Experiment in Regulatory Budgeting

46 Pages Posted: 24 Jun 2021

See all articles by Bentley Coffey

Bentley Coffey

Independent

Patrick A. McLaughlin

Mercatus Center at George Mason University

Date Written: May 2021

Abstract

We exploit a quasi-natural experiment to identify the effect of regulatory accumulation on economic growth. Following a decade of poor economic growth, the Canadian province of British Columbia implemented a regulatory budget in 2001. We use a difference-in-differences strategy to estimate the effect of this policy intervention, finding that British Columbia’s growth rate increased by about 25 percent relative to other provinces. We also present a set of regressions that, using data from the RegData project, directly account for changes to the stock of regulations as a possible determinant of economic growth. We find that regulatory budgeting, as implemented in British Columbia, is associated with much-improved economic performance. A 1 percent increase in the stock of regulations is associated with a 0.028 percent decrease in year-to-year economic growth. This finding implies that British Columbia’s regulatory budget experiment, through reducing the quantity of regulations by about 36 percent, positively affected year-to-year growth by approximately 1 percentage point.

Keywords: Regulatory budget; British Columbia; regulatory reform; red tape reduction; RegData; economic growth; synthetic control; difference-in-differences; growth accounting

JEL Classification: E20; H72; H73; H83; L50; O43

Suggested Citation

Coffey, Bentley and McLaughlin, Patrick A., Regulation and Economic Growth: Evidence from British Columbia’s Experiment in Regulatory Budgeting (May 2021). Mercatus Working Paper Series, Available at SSRN: https://ssrn.com/abstract=3868527 or http://dx.doi.org/10.2139/ssrn.3868527

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

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
89
Abstract Views
546
Rank
522,239
PlumX Metrics