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Employment and Output Effects of Federal Regulations on Small Business

Author

Listed:
  • Jang-Ting Guo

    (Department of Economics, University of California Riverside)

  • Dustin Chambers

    (Salisbury University)

Abstract

This paper examines the disparate impact of US federal regulations on small businesses. In the context of a two-sector dynamic general equilibrium macroeconomic model, we obtain three empirically testable implications of higher regulation: 1) the total number of small firms is reduced, 2) the employment share of small firms shrinks, and 3) small firms’ share of total output declines. Since the first of these testable hypotheses has already been confirmed in previous studies, we focus our attention on the latter two, and find strong empirical support for both. Specifically, we estimate that a ten percent increase in federal regulations reduces the employment share of small firms by nearly 0.7%, and an equally large increase in federal regulations decreases the output share of small firms by nearly 1.5%.

Suggested Citation

  • Jang-Ting Guo & Dustin Chambers, 2018. "Employment and Output Effects of Federal Regulations on Small Business," Working Papers 201813, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201813
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    File URL: https://economics.ucr.edu/repec/ucr/wpaper/201813.pdf
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    More about this item

    Keywords

    regulation; small business; firm size; industry concentration; dynamic general equilibrium.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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