TY  - UNPD
A1  - Singla, Shikhar
T1  - Regulatory costs and market power
T2  - LawFin working paper ; No. 47
N2  - Industry concentration and markups in the US have been rising over the last 3-4 decades. However, the causes remain largely unknown. This paper uses machine learning on regulatory documents to construct a novel dataset on compliance costs to examine the effect of regulations on market power. The dataset is comprehensive and consists of all significant regulations at the 6-digit NAICS level from 1970-2018. We find that regulatory costs have increased by $1 trillion during this period. We document that an increase in regulatory costs results in lower (higher) sales, employment, markups, and profitability for small (large) firms. Regulation driven increase in concentration is associated with lower elasticity of entry with respect to Tobin's Q, lower productivity and investment after the late 1990s. We estimate that increased regulations can explain 31-37% of the rise in market power. Finally, we uncover the political economy of rulemaking. While large firms are opposed to regulations in general, they push for the passage of regulations that have an adverse impact on small firms.
T3  - LawFin Working Paper - No. 47 
KW  - Market Power
KW  - Competition
KW  - Concentration
KW  - Machine Learning
KW  - Regulations
Y1  - 2023
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/68210
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-682108
UR  - https://ssrn.com/abstract=4368609
N1  - I am grateful to the Wheeler Institute for Business and Development and Deloitte Institute of Innovation and Entrepreneurship at London Business School for financial support. The paper also benefited significantly from Shikhar Singla’s visit as a research fellow at the Center for Advanced Studies on the Foundations of Law and Finance at Goethe University, funded by the German Research Foundation (DFG) under the project FOR 2774.
PB  - Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
CY  - Frankfurt am Main
ER  -