Understanding regulatory fragmentation: Firm-level evidence from China: A pre-registered report

Regulatory fragmentation arises when multiple government departments oversee the same domain. This study will develop a novel firm-level measure of regulatory fragmentation in China by leveraging departmental regulations and normative documents issued by State Council ministries from 2000 to 2023. Using this measure, we will examine how fragmented regulatory oversight affects firm outcomes across several key dimensions, including period costs, productivity, profitability, and firm growth. To identify a potential channel, we will analyze labor input and hypothesize that regulatory fragmentation escalates compliance complexity, thereby compelling firms to hire additional employees to manage regulatory demands. We will also explore heterogeneous effects across firms with different ownership, and distinguish between burdens arising from “regulatory duplication” and “regulatory inconsistency”. By introducing the first comprehensive index of State Council regulatory activity, this study will provide new evidence from China and contribute to the comparative understanding of how regulatory fragmentation shapes firm behavior across different stages of economic development and under alternative forms of state organization.