Regulation and the international competitiveness of US-based companies

The purpose of this paper is to provide and assess evidence bearing on whether government regulation in the USA is harming the international competitiveness of the US economy. A related purpose is to clarify the concept of international competitiveness from a public policy perspective.

The paper draws on various sources comparing the regulatory environment of the USA and other Organisation for Economic Co-operation and Development (OECD) countries over the past 15-20 years, as well as the international competitiveness of those countries, particularly the productivity growth of home country firms. The various measures of regulatory quality and international competitiveness for the USA are compared to those for a sample of other OECD countries to provide empirical evidence on two broad issues: has government regulation become more onerous in the USA relative to other OECD countries? and has the USA economy become less competitive compared to other OECD countries?

The evidence indicates that the US regulatory environment has become more onerous compared to other OECD countries and that the relative productivity performance of the US economy has declined in recent years. Evidence also suggests that the USA has become relatively less attractive as a location for production and research and development. While the paper does not directly link national measures of performance to measures of the regulatory environment, it provides a literature review of the empirical relationship between government regulation and private sector productivity performance. The review suggests that an apparent recent weakening of the international competitiveness of the US economy can be linked to a more onerous regulatory environment.

As noted above, the paper does not directly link in a statistical manner, data regarding the changing regulatory environment across countries to changes in measures of international competitiveness. This is the focus of future research.

By assessing a range of measures of the regulatory environment and national economic performance, the paper provides a fairly comprehensive and nuanced assessment of frequently made claims about regulation in the USA relative to other countries, as well as the relative attractiveness of the USA as a location for private sector activity.