The impact of regulation on innovation
Philippe Aghion,
Antonin Jean Jacob Bergeaud and
John van Reenen
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Abstract:
We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model's qualitative predictions, we find a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a sharp reduction in the positive innovation response of firms to exogenous demand shocks just below the regulatory threshold. Using the structure of our model we quantitatively estimate parameters and find that the regulation reduces aggregate equilibrium innovation (and growth) by 5.8% which translates into a consumption equivalent welfare loss of at least 2.3%, approximately doubling the static losses in the existing literature.
Keywords: innovation; regulation; patents; firm size (search for similar items in EconPapers)
JEL-codes: J8 L11 L25 L51 O31 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021-01-18
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://eprints.lse.ac.uk/121872/ Open access version. (application/pdf)
Related works:
Journal Article: The Impact of Regulation on Innovation (2023) 
Working Paper: The impact of regulation on innovation (2023) 
Working Paper: The Impact of Regulation on Innovation (2023)
Working Paper: The Impact of Regulation on Innovation (2023)
Working Paper: The Impact of Regulation on Innovation (2021) 
Working Paper: The impact of regulation on innovation (2021) 
Working Paper: The impact of regulation on innovation (2021) 
Working Paper: The Impact of Regulation on Innovation (2021) 
Working Paper: The impact of regulation on innovation (2021) 
Working Paper: The Impact of Regulation on Innovation (2021) 
Working Paper: The Impact of Regulation on Innovation (2021) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121872
Access Statistics for this paper
More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().