Regulation and Jobs: The Unequal Employment Effects of Regulatory Uncertainty

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The effects of regulation on jobs have been a heated theme in contemporary political debate. In
economic research, the empirical work suggests that regulation plays little role in affecting the
aggregate number of jobs in the United States. However, the existing research has mostly focused
on the volume or stringency of regulation. Little attention has been paid to regulatory uncertainty,
and yet its impact on employment has a basis in the economic theory.

The economic literature generally suggests that increased uncertainty can lead to significant
declines in hiring, investment, consumption, and output in the economy. This Regulatory Insight
discusses how regulatory uncertainty may affect employment and presents some empirical
evidence that increased regulatory uncertainty leads to a temporary drop in aggregate employment.
Moreover, the employment effects of regulatory uncertainty are unequal, affecting workers with
low levels of education disproportionately.

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