Regulating away competition: the effect of regulation on entrepreneurship and employment

James B. Bailey, Diana W. Thomas

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

Many scholars have worried that regulation deters entrepreneurship because it increases the cost of entry, reduces innovation in the regulated industry, and benefits large firms because they can overcome the costs of complying with regulations more easily than smaller firms. Using novel data on the extent of US federal regulations by industry and data on firm births and employment from the Statistics of US Businesses, we run fixed effects regressions to show that more-regulated industries experienced fewer new firm births and slower employment growth in the period 1998–2011. Large firms may even successfully lobby government officials to increase regulations to raise their smaller rivals’ costs. We also find that regulations inhibit employment growth in all firms and that large firms are less likely to exit a heavily regulated industry than small firms.

Original languageEnglish (US)
Pages (from-to)1-18
Number of pages18
JournalJournal of Regulatory Economics
DOIs
StateAccepted/In press - Oct 25 2017

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Entrepreneurship
Costs
Large firms
Regulated industries
Small firms
Employment growth
Innovation
Exit
Industry
New firms
Fixed effects
Lobbies
Statistics
Government

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Regulating away competition : the effect of regulation on entrepreneurship and employment. / Bailey, James B.; Thomas, Diana W.

In: Journal of Regulatory Economics, 25.10.2017, p. 1-18.

Research output: Contribution to journalArticle

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