Essays on Regulation in the United States

Brandon M. Pizzola

Major Professor: Alex T Tabarrok, PhD, Department of Economics

Committee Members: Thomas Stratmann, Garett B. Jones

Carow Hall, Conference Room
October 01, 2018, 01:00 PM to 03:00 PM

Abstract:

This dissertation consists of three chapters on regulation in the United States:

Business regulation and business investment: Evidence from US manufacturing 1970–2009

Regulation is often portrayed as placing a substantial burden on US businesses and the overall US economy. Moreover, policy options of “cutting red tape” and “reducing federal bureaucracy” are often asserted to be a way to stimulate investment and, through this channel, a way to promote economic growth. This chapter examines the relationship between growth in regulatory restrictions in the Code of Federal Regulations and manufacturing investment in the United States over the 1970–2009 period. An industry-level dataset is constructed by mapping the novel industry-specific RegData dataset from the Mercatus Center at George Mason University to the comprehensive industry-specific manufacturing data in the NBER-CES Manufacturing Industry Database. In total, the constructed dataset includes 337 manufacturing industries. This approach yields substantial evidence that increased business regulation is associated with decreased business investment.

Occupational licensing causes a wage premium: Evidence from a natural experiment in Colorado’s funeral services industry

This chapter studies the effect of occupational licensing on wages in the funeral services industry using a rare natural experiment. In 1983, Colorado delicensed funeral services. Using difference-in-differences, difference-in-difference-in-differences, and synthetic control specifications, this chapter compares wages in Colorado’s funeral services industry to wages in the US funeral services industry. Overall, the results from difference-in-differences, difference-in-difference-in-differences, and synthetic control specifications suggest occupational licensing causes a wage premium of 11–12%. This chapter finds similar results from a standard cross-sectional wage regression using data on individuals in 1990. Thus, this suggests that cross-sectional regressions of wages on occupational licensing in other industries are a good baseline estimate of a causal effect. This chapter also finds that licensing increases prices and appears to push consumers away from cremation and towards more expensive burial procedures.

Residential building permits and housing prices: Evidence from US counties

This chapter introduces a new, direct measure of a local barrier to housing development covering each of the 3,141 counties in the United States. Specifically, an indicator variable is constructed for whether or not a building permit is required for new residential construction in a county and its relationship with a county’s median housing price is examined. Four sets of results are included. First, the relationship between whether or not a building permit is required for new residential construction and a county’s median housing price is examined for the full dataset. Then, to address potential concerns about identification issues, this relationship is examined with three alternative subsets of the data: counties not requiring a building permit and (1) permitting counties similar to non-permitting counties in terms of population density, (2) permitting counties similar to non-permitting counties in terms of the total population, and (3) permitting counties adjacent or close to non-permitting counties. The results suggest a county requiring a building permit for new residential construction is associated with a 2.7% to 4.2% higher median housing price.