King's College London

In their study, Matia Vannoni (King’s College London), Massimo Morelli (Bocconi University) and Elliott Ash (ETH Zurich), found economic legislation, rather than social legislation, was more effective in boosting growth in US states and growth was higher when the additional legislation reduced uncertainties for business.

The researchers also found the economic impact of legislation was larger starting from states with lower legislative completeness, and was strongest for sectors that rely more on relationship-specific inputs and in states with higher local economic uncertainty.

The findings were revealed in a new paper, More Laws, More Growth? Evidence from US States, published in the Journal of Political Economy.

The academics said: “Our results add to a long-running debate on how laws and regulations influence growth prospects. Overall, the results are consistent with the ‘positive view’ that legislation is needed to regulate externalities, define the tax base, and allocate government expenditures; and usually, it helps the economy grow.”

Data for the study, which focussed on the United States, was drawn from economic output and growth figures, statute text data and legislative output from the 50 US states published between 1965-2012.

The researchers added: “The external validity of our results is an open question, and it would be interesting and useful to seek similar evidence in other federal systems, such as Canada, Switzerland, or the European Union.

“The theoretical mechanisms that we have explored could apply more broadly, however, and could help guide future empirical work.”