Employment and Output Effects of Federal Regulations on Small Business

Jang-Ting Guo and Dustin Chambers ()
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Dustin Chambers: Salisbury University

No 201813, Working Papers from University of California at Riverside, Department of Economics

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%.

Keywords: regulation; small business; firm size; industry concentration; dynamic general equilibrium. (search for similar items in EconPapers)
JEL-codes: C23 E23 L11 L51 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-ent and nep-mac
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https://economics.ucr.edu/repec/ucr/wpaper/201813.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201813

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