We introduce a new time series 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 offer a straightforward explanation for the productivity slowdown of the 1970s. Qualitatively and quantitatively, our results agree with those obtained from cross-section and panel measures of regulation using cross-country data.
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Journal Of Economic Groth
The Journal of Economic Growth is a peer-reviewed academic journal covering research in economic growth and dynamic macroeconomics. It was established in 1996 and is published by Springer Science+Business Media. The journal deals with both theories and their empirics, and examines the entire array of subject areas in economic growth, including neoclassical and endogenous growth models, growth and income distribution, human capital, fertility, trade, development, migration, money, the political e