Exploratory Research into Government Regulation’s Impact on Business-level Employment Growth

Abstract

Recent structural reforms of the Australian economy have included a determination to reduce any excessive regulatory burden on businesses. Previous research has shown that the regulatory burden may adversely impact employment growth; however little empirical research has been conducted on the Australian context. This research, using the Australian Bureau of Statistics Business Longitudinal Database, finds mixed evidence for the impact of government regulation on employment. While no significant impact is found for job creation, this paper finds that government regulation has a disproportionate effect on job destruction for firms aged five years or less. For firms that report government regulation as a barrier to performance, the odds of a younger firm reporting job destruction are more than two times greater than for other firms. Given the dataset used, these findings mainly refer to small and medium sized businesses.