Working Paper: CEPR ID: DP15629
Authors: Elliott Ash; Massimo Morelli; Matia Vannoni
Abstract: This paper analyzes the conditions under which more detailed legislation contributes to economic growth. In the context of U.S. states, we apply natural language processing tools to measure legislative flows for the years 1965-2012. We implement a novel shift-share design for text data, where the instrument for legislation is leave-one-out legal-topic flows interacted with pre-treatment legal topic shares. We find that at the margin, higher legislative detail causes more economic growth. Motivated by an incomplete-contracts model of legislative detail,we test and find that the effect is driven by contingent clauses, that the effect is concave in the pre-existing level of detail, and that the effect size is increasing with economic policy uncertainty.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher legislative detail (H11) | More economic growth (O49) |
| 10% increase in legislative output (D72) | Increase in per capita economic growth rates (O49) |
| Legislative output (D72) | Economic growth driven by contingent clauses (O49) |
| Pre-existing level of legislative detail (H11) | Marginal benefits of additional legislation diminish (K19) |
| Legislative output (D72) | Economic growth more pronounced under higher economic policy uncertainty (O49) |