More Laws, More Growth? Evidence from US States

Elliott Ash, Massimo Morelli and Matia Vannoni

Journal of Political Economy, 2025, vol. 133, issue 7, 2139 - 2179

Abstract: This paper analyzes the conditions under which more legislation contributes to economic growth. In the context of US states, we apply natural language processing tools to measure legislative flows for the years 1965–2012. We implement a novel shift-share design for text data, where the instrument for legislation is leave-one-out legal topic flows interacted with pretreatment legal topic shares. We find that at the margin, higher legislative output causes more economic growth. Consistent with more complete laws reducing ex post holdup, we find that the effect is driven by the use of contingent clauses, is largest in sectors with high relationship-specific investments, and is increasing with local economic uncertainty.

Date: 2025
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