The Cost of Regulatory Compliance in the United States / Francesco Trebbi, Miao Ben Zhang.

Format:

Book

Author/Creator:

Trebbi, Francesco.

Contributor:

National Bureau of Economic Research.

Zhang, Miao Ben.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30691.

NBER working paper series no. w30691

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We quantify firms' compliance costs of regulation from 2002 to 2014 in terms of their labor input expenditure to comply with government rules, a primary component of regulatory compliance spending for large portions of the U.S. economy. Detailed establishment-level occupation data, in combination with occupation-specific task information, allow us to recover the share of an establishment's wage bill owing to employees engaged in regulatory compliance. Regulatory costs account on average for 1.34 percent of the total wage bill of a firm, but vary substantially across and within industries, and have increased over time. We investigate the returns to scale in regulatory compliance and find an inverted-U shape, with the percentage regulatory spending peaking for an establishment size of around 500 employees. Finally, we develop an instrumental variable methodology for decoupling the role of regulatory requirements from that of enforcement in driving firms' compliance costs.

Notes:

Print version record

November 2022.