Measuring Regulation (Powerpoint Presentation)

This paper uses occupational employment and wage data for over 270 industries from 1990 to 2017 to estimate the percentage of an industry’s annual labor costs paid to perform regulation-related tasks. We hypothesize that this measure reflects the intensity of regulations that incentivize firm spending on compliance to avoid legal liability or regulatory sanctions. We study the sensitivity of this measure to shocks that in- crease or decrease regulatory intensity in the finance and energy sectors. Compared to text-based measures that count words in regulations, our Regulation Index reflects broader sources of regulation, can better detect the impact of regulations, and can better distinguish deregulation from increased regulation. Our measure is highly correlated with industry’s outsourced legal spending but offers more granular estimates for a larger number of industries.The paper that goes with this presentation is available at https://ssrn.com/abstract=3205589