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How does Public Regulation affect Growth?

Tue Goergens, Martin Paldam and Allan Würtz

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Public regulations can increase economic growth by correcting market faults and decrease growth by consuming resources and reducing incentives. A simple theoretical framework is developed to represent commonly held views on the relationship between growth an regulation. The relationship is possibly non-linear with some level of regulation being optimal. We estimate the relation by a fixed effect non-linear panel data regression model using a new semi-parametric estimator. The outcome shows that the relationship indeed may be non-linear: High levels of regulation lowers growth, but there is no effect on growth for moderate to low levels of regulation.

Keywords: Fixed effects; growth; semi-parametric regression; panel data; public regulation (search for similar items in EconPapers)
JEL-codes: C14 D7 O4 (search for similar items in EconPapers)
Pages: 17
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