The heterogenous effects of a higher volume of regulation: evidence from more than 200k Spanish norms

Abstract

We analyze the aggregate economic impacts, as well as the heterogeneous effects on the different types of enterprises, of the increasing volume of regulation observed in Spain between 1995 and 2000. Our novel database classifies more than 200,000 regulations adopted at the region level for 13 industries (sectors) of the Spanish economy. Exploiting this database, we are able to estimate the exposure to regulation of enterprises located in different Spanish regions. We find that an increase in the volume of regulations has an impact on economic activity, reducing employment. Entry of new firms in sectors-regions exposed to higher regulation is also lower. These effects are heterogeneous across firms, with negative effects concentrated in smaller and more recently established firms. This evidence emphasizes the importance of both the aggregate and distributional impact of the changing (increasing) volumes of regulation.