Regulation and the International Competitiveness of the U.S. Economy

September 28, 2012

The goal of every country is to create economic competitiveness by strengthening its domestic industries to compete in global markets. While most discussions involving economic growth revolve around tax and spending policy, one area requires more concern: the burden of government regulation, say Steven Globerman, the Kaiser Professor of International Business at Western Washington University, and George Georgopoulos, an associate professor at the Department of Economics at York University.

Globerman and Georgopoulos look at two decades of data from the Organization for Economic Cooperation and Development (OECD), academic studies and business surveys to assess if U.S. competitiveness has declined and whether regulation in the United States is more burdensome than regulation in other OECD countries.

The data obtained from the OECD measures competitiveness by looking at the productivity growth and other measures such as indicators of technical change, direct foreign investment flows in domestic markets, and the expressed intentions to relocate investments.

  • According to the data, U.S. productivity growth has shrunk in the past 5 years.
  • In 2011, two other OECD countries ranked higher in the United States in technical change and innovation.
  • According to thousands of surveyed business leaders, two OECD countries were rated as a better environment for innovation.
  • Furthermore, nine OECD countries were rated as having less risk of business relocation than the United States.
  • According to a Harvard Business School survey of about 10,000 alumni, three-quarters expected U.S. competitiveness to decline and cited regulations as the reason for the decline.

Globerman and Georgopoulos also took surveys from the World Economic Forum (WEF) global competitiveness index survey and the Heritage Index of Economic Freedom to look at how business leaders felt about regulations in the United States.

  • According to the WEF survey, only two OECD countries were ranked as having better property rights protections than the United States in 2011.
  • Similarly, in 2005, four OECD countries ranked higher than the United States in regulatory quality. In 2011, 10 countries outranked the United States.
  • According to the Heritage Index of Economic Freedom in 2005, the United States was ranked best in terms of financial freedom. In 2011, nine countries ranked higher.

Source: Steven Globerman and George Georgopoulos, "Regulation and the International Competitiveness of the U.S. Economy," Mercatus Center, September 18, 2012.

 

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