Drafting “better regulation”: The economic cost of regulatory complexity

Abstract

Different public agencies are seeking to draft “better regulation”. Complex or poorly drafted norms are more difficult for economic agents to implement, tending to erode economic efficiency. The literature has so far concentrated on the analysis of regulatory complexity as a phenomenon related to the “quantity” of norms. This article guides the process of adopting new regulations, taking into account that norms can also be complex due to new “qualitative” reasons such as linguistic ambiguity or relational structure (references between legal documents). To perform the analysis, we develop new indicators for legibility and regulatory interconnectedness. Specifically, we construct a new database (RECOS – REgulation COmplexity in Spain) by extracting information from 8171 norms (61 million words) which comprise the regulations of all the Spanish Autonomous regions. Our analysis reveals the relationship between measures of “qualitative” complexity and relevant economic (productivity) and institutional (judicial efficacy) variables. This research shows that the new dimensions of regulatory complexity matter, yield significant results and should be taken into account in governments’ “better regulation” policies.

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