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The Macroeconomic Effects of Federal Regulation

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Author Info
John W. Dawson
John J. Seater

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Abstract

We introduce a new measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that produce it - total factor productivity, physical capital, and labor. The effects are multifaceted and complex. Regulation changes the way output is produced by changing the mix of inputs. It also affects both the trends and deviations about the trends in output and its factors of production, and the effects differ across dependent variables. The effects display interesting intertemporal dynamics. Changes in regulation and marginal tax rates offer an explanation for the productivity slowdown of the 1970s. Regulation also has substantial opportunity costs in the form of foregone output.

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File URL: http://econ.appstate.edu/RePEc/pdf/wp0502.pdf
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Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 05-02.

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Length: 43 pages
Date of creation: 2005
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Handle: RePEc:apl:wpaper:05-02

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  1. Nicoletti, Giuseppe & Scarpetta, Stefano, 2003. "Regulation, productivity, and growth : OECD evidence," Policy Research Working Paper Series 2944, The World Bank. [Downloadable!]
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  2. Francis X. Diebold & Atsushi Inoue, 2000. "Long Memory and Regime Switching," NBER Technical Working Papers 0264, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003. "Regulation and Investment," OECD Economics Department Working Papers 352, OECD, Economics Department. [Downloadable!]
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  4. Zellner, A., 1988. "Causality And Causal Laws In Economics," Papers m8801, Southern California - Department of Economics.
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  5. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211. [Downloadable!] (restricted)
  6. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. [Downloadable!] (restricted)
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  7. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank. [Downloadable!]
  8. Jacobs, Rodney L & Leamer, Edward E & Ward, Michael P, 1979. "Difficulties with Testing for Causation," Economic Inquiry, Oxford University Press, vol. 17(3), pages 401-13, July.
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  9. Casey B. Mulligan & Andrei Shleifer, 2004. "Population and Regulation," NBER Working Papers 10234, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  11. Forteza, Alvaro & Rama, Martin, 2001. "Labor market"rigidity"and the success of economic reforms across more than one hundred countries," Policy Research Working Paper Series 2521, The World Bank. [Downloadable!]
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  12. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April. [Downloadable!] (restricted)
  13. Feige, Edgar L & Pearce, Douglas K, 1979. "The Casual Causal Relationship between Money and Income: Some Caveats for Time Series Analysis," The Review of Economics and Statistics, MIT Press, vol. 61(4), pages 521-33, November. [Downloadable!] (restricted)
  14. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September. [Downloadable!] (restricted)
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  1. John W. Dawson, 2005. "Regulation and the Macroeconomy," Working Papers 05-16, Department of Economics, Appalachian State University. [Downloadable!]
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