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Regulation and the Macroeconomy

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  • John W. Dawson

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 W. Dawson, 2005. "Regulation and the Macroeconomy," Working Papers 05-16, Department of Economics, Appalachian State University.
  • Handle: RePEc:apl:wpaper:05-16
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    File URL: http://econ.appstate.edu/RePEc/pdf/wp0516.pdf
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    References listed on IDEAS

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    1. John J. Seater & John W. Dawson, 2008. "The Macroeconomic Effects of Federal Regulation," 2008 Meeting Papers 1035, Society for Economic Dynamics.
    2. John W. Dawson & John J. Seater, 2005. "The Macroeconomic Effects of Federal Regulation," Working Papers 05-02, Department of Economics, Appalachian State University.
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    7. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
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    12. Casey B. Mulligan & Andrei Shleifer, 2004. "Population and Regulation," NBER Working Papers 10234, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bjørnskov, Christian, 2016. "Economic freedom and economic crises," European Journal of Political Economy, Elsevier, pages 11-23.

    More about this item

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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