The impact of regulation on innovation
Aghion, P.
, Bergeaud, A. & Van Reenen, J.
(2023).
The impact of regulation on innovation.
American Economic Review,
113(11), 2894 - 2936.
https://doi.org/10.1257/aer.20210107
, Bergeaud, A. & Van Reenen, J.
(2023).
The impact of regulation on innovation.
American Economic Review,
113(11), 2894 - 2936.
https://doi.org/10.1257/aer.20210107
We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data, where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a reduction in the innovation response of firms to demand shocks just below the threshold. Regulation reduces aggregate innovation by 5.7 percent.
Explore Further
- K31 - Labor Law
- L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
- L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
- L51 - Economics of Regulation
- O31 - Innovation and Invention: Processes and Incentives
- O34 - Intellectual Property Rights: National and International Issues
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Aghion, P., Van Reenen, J. & Bergeaud, A.
(2023).
Data and Code for the paper "The Impact of Regulation on Innovation".
[Dataset]. OpenICPSR.
https://doi.org/10.3886/e192169
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picture_as_pdf - Online_Appendix.pdf
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subject - Accepted Version
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picture_as_pdf - Manuscript_002_.pdf
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subject - Accepted Version