Industry Regulation Indexes

This study constructs a tool to measure the intensity of regulations (regulatory indicators) at the industry-year level in Japan and empirically examines the relationship between the intensity of regulations and various variables such as real GDP and productivity measured at the industry-year level. We construct multiple regulatory indicators based on the method proposed by the Cabinet Office (2006) with comprehensive use of the information in the Table of Current Status of Licenses and Approvals. Using the indicators that show dynamics similar to the regulatory indicators constructed by the OECD (Nicoletti et al., 2001), first, we confirm industry-specific and cross-industry deregulation following high mark-up rates. Second, the analysis of manufacturing and commerce also separately suggest a tendency for man-hours to decline after deregulation in these industries, while capital and labor quality in those industries improved. These results suggest that the regulatory indicators constructed in this study provide useful information for examining the dynamics related to economic variables at the industry level.