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Regulation, Investment, and Growth across Countries

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  • John W. Dawson

Abstract

This paper uses cross-country regulation data to examine the relationship between government regulation, investment, and long-run growth in a large sample of countries. The empirical results suggest that (1) highly regulated economies tend to have high rates of public investment; (2) regulation has a negative impact on private investment; (3) regulation has a negative impact on growth rates; and (4) volatility in the regulatory regime is negatively related to growth. Conclusions (1) and (4) hold even when measures of economic freedom are included in the model. Interesting implications with respect to policy toward regulatory reform are suggested.
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Suggested Citation

  • John W. Dawson, 2006. "Regulation, Investment, and Growth across Countries," Cato Journal, Cato Journal, Cato Institute, vol. 26(3), pages 489-509, Fall.
    • Handle: RePEc:cto:journl:v:26:y:2006:i:3:p:489-509
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    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
    2. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
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    7. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
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    Cited by:

    1. Vatcharin Sirimaneetham, 2006. "Explaining policy volatility in developing countries," Bristol Economics Discussion Papers 06/583, School of Economics, University of Bristol, UK.
    2. Rachel L. Coyne, 2014. "Economic freedom, entrepreneurship and growth," Chapters, in: Robert F. Salvino Jr. & Michael T. Tasto & Gregory M. Randolph (ed.), Entrepreneurial Action, Public Policy, and Economic Outcomes, chapter 3, pages 34-51, Edward Elgar Publishing.
    3. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
    4. Jan Hanousek & Evžen Kočenda, 2011. "Public Investment and Fiscal Performance in the New EU Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 43-71, March.
    5. Jan Hanousek & Evžen Kočenda, 2011. "Vazba korupce a hospodářské svobody na veřejné finance a investice nových členů EU [Corruption and Economic Freedom Links to Public Finance and Investment in New EU Members]," Politická ekonomie, Prague University of Economics and Business, vol. 2011(3), pages 310-328.
    6. Vatcharin Sirimaneetham, 2006. "What drives liberal policies in developing countries?," Bristol Economics Discussion Papers 06/587, School of Economics, University of Bristol, UK.
    7. Ted H. Chu & Marshall L. Stocker & Brandon J. Tan, 2021. "Economic fitness: How equity market returns reflect the realization of economic growth potential," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1550-1562, January.
    8. 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.
    9. Danko Tarabar & Andrew T. Young, 2017. "Liberalizing Reforms and the European Union: Accession, Membership, and Convergence," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 932-951, April.
    10. Martin Rode & Sebastian Coll, 2012. "Economic freedom and growth. Which policies matter the most?," Constitutional Political Economy, Springer, vol. 23(2), pages 95-133, June.
    11. Stocker, Marshall L., 2016. "The price of freedom: A Fama–French freedom factor," Emerging Markets Review, Elsevier, vol. 26(C), pages 1-19.
    12. Adi Eleonor TRIFU & Adriana GÎRNEA?Ã & Ana Mãdãlina POTCOVARU, 2015. "The Impact of Regulations upon the Startup of New Businesses," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 18(1), pages 49-59, June.
    13. Noel D. Campbell & Andres Jauregui & Kirk C. Heriot, 2008. "Housing Prices and Economic Freedom," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 23(Spring 20), pages 1-17.
    14. Davidsson, Michael & Cortes, Bienvenido, 2017. "The Role of the Housing Supply and the Regulatory Environment in Economic Growth of Micropolitan Statistical Areas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 47(1).
    15. Agnieszka Głodowska, 2017. "Business Environment and Economic Growth in the European Union Countries: What Can Be Explained for the Convergence?," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 5(4), pages 189-204.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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