Regulación autonómica y productividad

REGULATION, INNOVATION AND PRODUCTIVITY IE Business School Working Paper WP10-04 15/07/2010 Francisco Marcos Juan Santaló

In this paper we show how the process of decentralization in Spain has resulted in a wide dispersion of the quantity of regulation in the different regions (Self Governing Communities). We make use of this cross- sectional variation to estimate the effect of distinct paths of regulatory intensity on regional productivity and innovation. We find that the total number of “regulatory pages” published and the total number of norms each region has adopted has an important negative effect. Our estimates show that an increase of 100% in the number of norms is associated with a decrease of 79-81% in the numberof regional patent applications and a lower TFP growth rate of around 3.5%. Given that the average TFP growth rate during the period is -0.15% this estimates show that productivity slowdown in the Spanish economy during the period could have been avoided if regional governments would had undertaken a much lower regulatory activity. We do not find evidence supporting that this decrease in productivity is caused by lower product market competition at the regional level. However we find some indication that regulatory intensity affects firms asymmetrically and therefore distorts the optimal allocation of resources. More regulation intensity affects negatively the proportion of resources controlled by business establishments with 200 employees or more and this extra burden precisely to the more innovative companies may explain the negative linkage between regulation and productivity.