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The Macroeconomic Effects of Federal Regulation

Author

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  • John J. Seater

    (North Carolina State University)

  • John W. Dawson

    (Appalachian State University)

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 (TFP), physical capital, and labor. Regulation has caused substantial reductions in the growth rates of both output and TFP and has had effects on the trends in capital and labor that vary over time in both sign and magnitude. Regulation also affects deviations about the trends in output and its factors of production, and the effects differ across dependent variables. Regulation changes the way output is produced by changing the mix of inputs. Changes in regulation and marginal tax rates also offer a straightforward explanation for the productivity slowdown of the 1970s.

Suggested Citation

  • John J. Seater & John W. Dawson, 2008. "The Macroeconomic Effects of Federal Regulation," 2008 Meeting Papers 1035, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:1035
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    Cited by:

    1. John W. Dawson, 2007. "Regulation and the Macroeconomy," Kyklos, Wiley Blackwell, vol. 60(1), pages 15-36, February.

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