Regulating Away Competition: The Effect of Regulation on Entrepreneurship and Employment

24 Pages Posted: 7 Jun 2018

See all articles by James B. Bailey

James B. Bailey

Providence College Department of Economics

Diana Weinert Thomas

Creighton University

Date Written: 09/09/2015

Abstract

Many scholars have worried that regulation deters entrepreneurship because larger firms can overcome the costs of complying with regulations more easily than smaller firms. Using novel data on the extent of US federal regulations by industry at the four-digit NAICS (North American Industry Classification System) level, the RegData database of the Mercatus Center at George Mason University, and data on firm births and employment from the Statistics of US Businesses, we run fixed effects regressions to show that more-regulated industries experienced fewer new firm births and slower employment growth in the period 1998 to 2011. Large firms may even successfully lobby government officials to increase regulations to raise their smaller rivals' costs. We also find that regulations inhibit employment growth in small firms more than in large firms.

Suggested Citation

Bailey, James B. and Thomas, Diana Weinert, Regulating Away Competition: The Effect of Regulation on Entrepreneurship and Employment (09/09/2015). MERCATUS WORKING PAPER, Journal of Regulatory Economics, Vol. 52, No. 3, pp. 237-254, December 2017, Available at SSRN: https://ssrn.com/abstract=3191318 or http://dx.doi.org/10.2139/ssrn.3191318

James B. Bailey (Contact Author)

Providence College Department of Economics ( email )

1 Cunningham Sq
Providence, RI 02918
United States

HOME PAGE: http://https://economics.providence.edu/faculty-members/james-bailey/

Diana Weinert Thomas

Creighton University ( email )

2500 California Plaza
Omaha, NE 68178
United States

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