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Regulation, Investment, and Growth Across Countries

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  • John W. Dawson

Abstract

This paper uses cross-country regulation data to examine the relationship between government regulation, investment, and long-run growth in a large sample of countries. The empirical results suggest that (1) highly regulated economies tend to have high rates of public investment; (2) regulation has a negative impact on private investment; (3) regulation has a negative impact on growth rates; and (4) volatility in the regulatory regime is negatively related to growth. Conclusions (1) and (4) hold even when measures of economic freedom are included in the model. Interesting implications with respect to policy toward regulatory reform are suggested.

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File URL: http://econ.appstate.edu/RePEc/pdf/wp0310.pdf
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Bibliographic Info

Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 03-10.

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Date of creation: 2003
Date of revision: 2006
Publication status: forthcoming, Cato Journal
Handle: RePEc:apl:wpaper:03-10

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Phone: 828-262-2148
Fax: 828-262-6105
Web page: http://www.business.appstate.edu/departments/economics/
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  1. Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei & Lopez de Silanes, Florencio, 2001. "The regulation of entry," Policy Research Working Paper Series 2661, The World Bank.
  2. Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
  3. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  4. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
  5. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  6. de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
  7. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
  8. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
  9. James D . Gwartney & Randall G . Holcombe & Robert A . Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, vol. 59(2), pages 255-273, 05.
  10. Pitlik, Hans, 2002. "The Path of Liberalization and Economic Growth," Kyklos, Wiley Blackwell, vol. 55(1), pages 57-79.
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Cited by:
  1. Vatcharin Sirimaneetham, 2006. "Explaining policy volatility in developing countries," Bristol Economics Discussion Papers 06/583, Department of Economics, University of Bristol, UK.
  2. Jan Hanousek & Evžen Kočenda, 2011. "Public Investment and Fiscal Performance in the New EU Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 43-71, 03.
  3. Jan Hanousek & Evzen Kocenda, 2010. "Public Investment and Fiscal Performance in New EU Member States," William Davidson Institute Working Papers Series wp1006, William Davidson Institute at the University of Michigan.
  4. Martin Rode & Sebastian Coll, 2012. "Economic freedom and growth. Which policies matter the most?," Constitutional Political Economy, Springer, vol. 23(2), pages 95-133, June.
  5. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
  6. Jan Hanousek & Evžen Kočenda, 2011. "Corruption and Economic Freedom Links to Public Finance and Investment in New EU Members," Politická ekonomie, University of Economics, Prague, vol. 2011(3), pages 310-328.
  7. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, Department of Economics, University of Bristol, UK.

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