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Spring 2021

ISSN 0890-913X

Volume 36, Number 1

Categories: Spring 2021 | Taxation

The Role of Regulation and Taxes in US Capital and Labor Input Use

John W. Dawson, Appalachian State University

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TheJournalofPrivateEnterprise36(1),2021,55–78TheRoleofRegulationandTaxesinUSCapitalandLaborInputUseJohnW.Dawson*AppalachianStateUniversity______________________________________________________AbstractThispaperusesrevisedandextendeddataonfederalregulationandmarginaltaxratestoprovideacloserlookthanpreviousstudiesathowthesepolicyvariablesaffectthemixofinputsusedintheUSeconomy.Time-seriesmodelsforlaborandphysicalcapitalinputsindicatethatregulationandtaxesalterthetimepathsofbothinputs,withapositivetaxeffectdominatingthemovementoflaborandanegativeregulationeffectdominatingforcapital.Intermsofthemixofinputsusedinproduction,thecombinedeffectsofchangesintaxratesandregulationsince1949reducedthelevelofcapitalperworkerbymorethan50percentthrough2016.______________________________________________________JELCodes:E23,H20,L50Keywords:regulation,taxes,aggregateproduction,capital,laborI.IntroductionIntheirstudyofregulationandmacroeconomicperformance,DawsonandSeater(2013)provideempiricalevidencethattaxesandregulationalteredthetimepathsofbothrealoutputandtherelativeamountsofthekeyinputs—physicalcapitalandlabor—usedtoproduceagivenamountofoutputoverthe1949–2005period.Inotherwords,theirevidencesuggestsregulationandtaxpolicyaffectednotonlyoutput’spathbutalsohowoutputwasproducedintheUnitedStates.Withmostoftheirattentionfocusedonrealoutputandtotalfactorproductivityasthedependentvariables,however,DawsonandSeater’sdiscussionofthecapitalandlaborinputsislimitedandoffersnodetailsonthemagnitudeordirectionofthepolicyeffects.*TheauthorgratefullyacknowledgesusefulcommentsfromJohnSeaterandananonymousrefereethatimprovedthefinalversionofthispaper.Datageneratedand/oranalyzedinthisstudyareavailablefromtheauthoruponrequest.

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Title	The Role of Regulation and Taxes in US Capital and Labor Input Use
Authors/Creators:	John W. Dawson, Appalachian State University
Year:	2021
Volume:	36
Number:	1
Pages:	55 - 78
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	regulation, taxes, aggregate production, capital, labor

Citation:
Dawson, John W. / 2021. "The Role of Regulation and Taxes in US Capital and Labor Input Use." The Journal of Private Enterprise, 36(1): 55-78.