The Cost of Regulatory Compliance in the United States

Francesco Trebbi; Miao Ben Zhang; Michael Simkovic

doi:10.1093/rfs/hhag046

The Cost of Regulatory Compliance in the United States

Francesco Trebbi¹; Miao Ben Zhang²; Michael Simkovic³

¹ University of California Berkeley Haas School of Business, CEPR, and NBER , · ² University of Southern California, Marshall School of Business. · ³ University of Southern California Gould School of Law ,

Review of Financial Studies 2026 open access

Abstract A key question for studying business dynamism is whether the costs of regulatory compliance fall homogeneously on small and large businesses. Using comprehensive establishment-level occupational microdata and occupation task information, we quantify a firm’s compliance costs as the share of wage bill for performing regulatory compliance tasks (RegIndex). We reveal an inverted-U relationship between firms’ RegIndex and their size: On average, RegIndex for mid-sized firms with around 500 employees is about 47% greater than that of the smallest firms and 18% greater than that of the largest firms. We further develop a shift-share methodology to disentangle the influence of regulatory requirements and enforcement on driving firms’ compliance costs.

DOI: 10.1093/rfs/hhag046
Language: en
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