and seminar participants at Bocconi, Pavia and Konstanz for useful comments. This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 72073. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

No abstract

This paper studies for first time the impact of the regulatory complexity by sector in Spain on various measures of economic efficiency. We base our analysis on an innovative database that classifies 206,777 regulations by sector of activity and by region which highlights the growing volume of regulation, as well as its diversity by sector, by region and by business cycle stage. This analysis first looks at the aggregate impacts of sectoral regulatory complexity on the employment-to-population ratio, total working hours, sectoral GDP shares, labor intensity or capital intensity, but it delves, in the second place, into the heterogenous impacts observed over firms with different sizes and ages, making use of a rich database at the enterprise level, the MCVL - Continuous Work History Sample-. On the first front, we estimate a set of multiple fixed-effects model specifications across 13 economic sectors, 23 regulatory sectors and 17 Spanish regions over the period 1995-2020. Our results suggest that greater regulatory complexity has a negative effect on employment rate and has a negative impact on value added. The effect on employment is consistent with previous findings for the U.S. In particular, each additional increase in regulatory complexity index is associated with 0.7 percent drop in the sector-level employment share, ceteris paribus. Furthermore, our results suggest that several distortionary sector-level effects of increasing regulatory complexity are taking place. Markedly lower labor intensity and decreased sector-level investment rates, which confirm that expansive regulatory complexity entails non-trivial sector-level costs. Distortionary effects of regulatory complexity materialize through compositional differences mainly through reduced wages and investment rate. On the second front, using data on employment by firms’ characteristics, we show that the negative impact of regulatory complexity concentrates on smaller and younger firms. This finding supports the hypothesis that a more complex regulation imposes a burden than small and less experienced firms are less capable to handle. At the sector level, the group of sectors more negatively affected is manufacturing. This may be related to the higher investment required by these sectors. JEL CODES: K2; R11; J00; E02.

SERIES Working Papers n. 03/2018 SERIES sono pubblicati a cura del Dipartimento di Scienze economiche e metodi matematici dell'Università degli Studi di Bari "Aldo Moro". I lavori riflettono esclusivamente le opinioni degli autori e non impegnano la responsabilità del Dipartimento. SERIES vogliono promuovere la circolazione di studi ancora preliminari e incompleti, per suscitare commenti critici e suggerimenti. Si richiede di tener conto della natura provvisoria dei lavori per eventuali citazioni o per ogni altro uso.