Economics Department

Working Papers in Economics

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TITLE:
Regulation and Investment

AUTHOR(S):
Alberto Alesina, Harvard University
Silvia Ardagna, Wellesley College
Giuseppe Nicoletti, OECD
Fabio Schiantarelli, Boston College

DOCUMENT TYPE: Article

ABSTRACT:
One commonly held view about the difference between continental European countries and other OECD economies, especially the United States, is that the heavy regulation of the former reduces their growth. Using newly assembled data on regulation in several sectors of many OECD countries, we provide substantial and robust evidence that various measures of regulation in the product markets, concerning in particular entry barriers, are negatively related to investment. The policy implication of our analysis is clear: regulatory reforms that liberalize entry are very likely to spur investment.