The Unequal Employment Effects of Regulatory Uncertainty

This paper examines how increases in regulatory uncertainty may affect employment and presents empirical evidence that the employment effects of regulatory uncertainty are unequal for workers with different levels of educational attainment. VAR estimations suggest that a regulatory uncertainty shock leads to a more persistent and larger drop in employment at lower education levels. This finding is consistent with the expectation of unequal real-options effects of uncertainty due to heterogeneous adjustment costs