Research for Productivity

The rate of productivity growth in the U.S. economy and the extent and effects of government regulation have been matters of great concern in recent years. This study is an empirical investigation of the effect of regulation on productivity in the auto and steel industries during the period 1958-1980. The first step in the study was to develop numerical measures of regulations. These measures were then employed in two empirical models. In the single-equation model, the level or rate of growth of productivity was estimated as a function of output, technology, regulation, and other variables. In the multiequation model, cost and input cost shares were jointly estimated as a function of input prices, output, technology, and regulation. The estimate effect of regulation on productivity varied, depending on the model and the measure of regulation used. For example, the multiequation model indicated a positive effect of regulation on productivity in the steel industry. For the auto industry, however, it indicated that regulation generally had the expected negative effect on productivity. Over the period 1973-1980, regulation was estimated to have lowered the annual rate of productivity growth in the auto industry by 0.55 to 2.00 percentage points, depending on the measures of output and regulation. For Additional Information See 02 052702 00.