IDEAS home Printed from https://ideas.repec.org/a/bla/pacecr/v28y2023i4p503-518.html
   My bibliography  Save this article

Employment and output effects of federal regulations on small business

Author

Listed:
  • Dustin Chambers
  • Jang‐Ting Guo

Abstract

This paper examines the disparate impact of US federal regulations on small businesses. Using a two‐sector dynamic general equilibrium model, we obtained two implications of higher regulation on small firms that have yet to be empirically tested in the published literature. First, as regulations increase, small firms’ share of employment shrinks. Second, as regulations rise, small firms’ share of total output falls. Using a panel of industry‐specific US regulatory restrictions, we found that a 10% increase in federal regulations was associated with an approximate 0.8% reduction in small firms’ share of industry employment and a nearly 1.5% decline in small firms’ share of industry output.

Suggested Citation

  • Dustin Chambers & Jang‐Ting Guo, 2023. "Employment and output effects of federal regulations on small business," Pacific Economic Review, Wiley Blackwell, vol. 28(4), pages 503-518, October.
    • Handle: RePEc:bla:pacecr:v:28:y:2023:i:4:p:503-518
    DOI: 10.1111/1468-0106.12353
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-0106.12353
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1468-0106.12353?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mills, David E & Schumann, Laurence, 1985. "Industry Structure with Fluctuating Demand," American Economic Review, American Economic Association, vol. 75(4), pages 758-767, September.
    2. John Dawson & John Seater, 2013. "Federal regulation and aggregate economic growth," Journal of Economic Growth, Springer, vol. 18(2), pages 137-177, June.
    3. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
    4. James B. Bailey & Diana W. Thomas, 2017. "Regulating away competition: the effect of regulation on entrepreneurship and employment," Journal of Regulatory Economics, Springer, vol. 52(3), pages 237-254, December.
    5. Avi Fiegenbaum & Aneel Karnani, 1991. "Output flexibility—A competitive advantage for small firms," Strategic Management Journal, Wiley Blackwell, vol. 12(2), pages 101-114, February.
    6. Nathan Goldschlag & Alex Tabarrok, 2018. "Is regulation to blame for the decline in American entrepreneurship?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(93), pages 5-44.
    7. Dhawan, Rajeev & Guo, Jang-Ting, 2001. "Declining Share of Small Firms in U.S. Output: Causes and Consequences," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 651-662, October.
    8. Chambers, Dustin & McLaughlin, Patrick, 2018. "Regulation, Entrepreneurship, and Firm Size," Working Papers 09458, George Mason University, Mercatus Center.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dustin Chambers & Patrick A. McLaughlin & Tyler Richards, 2022. "Regulation, entrepreneurship, and firm size," Journal of Regulatory Economics, Springer, vol. 61(2), pages 108-134, April.
    2. Chambers, Dustin & O'Reilly, Colin, 2022. "Regulation and income inequality in the United States," European Journal of Political Economy, Elsevier, vol. 72(C).
    3. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    4. Dustin Chambers & Patrick A. McLaughlin & Oliver Sherouse, 2023. "Regulation, entrepreneurship, and dynamism," Empirical Economics, Springer, vol. 64(5), pages 2449-2466, May.
    5. Masayuki Morikawa, 2023. "Compliance costs and productivity: an approach from working hours," Journal of Regulatory Economics, Springer, vol. 63(3), pages 117-137, June.
    6. Juan S. Mora-Sanguinetti & Javier Quintana & Isabel Soler & Rok Spruk, 2024. "The heterogenous effects of a higher volume of regulation: evidence from more than 200k Spanish norms," Journal of Regulatory Economics, Springer, vol. 65(1), pages 137-153, June.
    7. Patrick A. McLaughlin & Oliver Sherouse, 2019. "RegData 2.2: a panel dataset on US federal regulations," Public Choice, Springer, vol. 180(1), pages 43-55, July.
    8. Francesco Trebbi & Miao Ben Zhang, 2022. "The Cost of Regulatory Compliance in the United States," NBER Working Papers 30691, National Bureau of Economic Research, Inc.
    9. Brandon Pizzola, 2018. "Business regulation and business investment: evidence from US manufacturing 1970–2009," Journal of Regulatory Economics, Springer, vol. 53(3), pages 243-255, June.
    10. Koirala, Pankaj & Kotani, Koji & Managi, Shunsuke, 2022. "How do farm size and perceptions matter for farmers’ adaptation responses to climate change in a developing country? Evidence from Nepal," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 188-204.
    11. John A. Dove, 2023. "One size fits all? The differential impact of federal regulation on early-stage entrepreneurial activity across US states," Journal of Regulatory Economics, Springer, vol. 63(1), pages 57-73, April.
    12. Singla, Shikhar, 2023. "Regulatory costs and market power," LawFin Working Paper Series 47, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    13. Lucas, David & Boudreaux, Christopher, 2018. "Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom," MPRA Paper 92593, University Library of Munich, Germany.
    14. Chambers, Dustin, 2021. "Toward a Formalization of Policy Analytics," Working Papers 11019, George Mason University, Mercatus Center.
    15. Koppenberg, Maximilian & Mishra, Ashok K. & Dalhaus, Tobias & Hirsch, Stefan, 2023. "The value of firm flexibility under extreme positive demand shocks: COVID-19 and toilet paper panic purchases," Economics Letters, Elsevier, vol. 222(C).
    16. David S. Lucas & Christopher J. Boudreaux, 2019. "The Interdependence of Hierarchical Institutions: Federal Regulation, Job Creation, and the Moderating Effect of State Economic Freedom," Papers 1903.02924, arXiv.org.
    17. Chambers, Dustin & Sherouse, Oliver & McLaughlin, Patrick, 2020. "Regulation, Entrepreneurship, and Dynamism," Working Papers 10295, George Mason University, Mercatus Center.
    18. Glenn Scheerlinck & Caroline Buts & Marc Cools & Genserik Reniers, 2020. "The impact of regulation on private security industry dynamics," European Journal of Law and Economics, Springer, vol. 50(2), pages 223-240, October.
    19. Andrew Smith & Graham Brownlow, 2023. "Informal Institutions as Inhibitors of Rent-Seeking Entrepreneurship: Evidence From U.S. Legal History," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2323-2346, November.
    20. Choudhury, Sanchari, 2023. "The causal effect of regulation on income inequality across the U.S. states," European Journal of Political Economy, Elsevier, vol. 80(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:pacecr:v:28:y:2023:i:4:p:503-518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1361-374X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.