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The Impact of Regulatory Costs on Small Firms

In 2010, the Office of Advocacy released a study by Nicole V. Crain and W. Mark Crain titled “The Impact of Regulatory Costs on Small Firms.”  This was the fourth in a series of papers dating back to 1995.  The goal of the series has been to quantify the economic impact of regulations on small businesses and determine if those impacts are disproportionate when compared to large businesses. 

However, since the latest iteration of the study was released, the findings of the study have been taken out of context and certain theoretical estimates of costs have been presented publicly as verifiable facts.  The following is intended as clarification of the intention of the study and its findings.

  • The study is a top-down analysis of regulatory costs that uses certain assumptions to estimate totals.
  • The study is not a bottom-up precise accounting of the overall cost of regulations.
  • The overall figure of $1.75 trillion in costs is derived from a number of different assumptions and sources to create an estimate.
  • As with almost any academic methodology, it was not intended to be considered a precise finding.
  • The study demonstrated that small businesses bear a larger burden from regulations than large businesses.
  • It was not intended to do more than provide an estimate of this disparity.
  • The data for this study only goes through 2008.
  • The study cannot appropriately be used to inform discussion about any regulatory costs that have or have not been incurred since 2008.
  • The methodology used in part of this study is novel, but the authors explain why they chose to use it and offer caveats concerning the results.
  • The Office of Advocacy continues to encourage the academic community to engage in this discussion about the best methodology to consider how small businesses are affected by regulations.   

Congress created Advocacy in 1976 to give a voice to small businesses that were not being considered during the rule-making process.  Considering the costs of regulations is critical to gain the required insight to work with agencies to minimize the burden on small businesses while still achieving the goals of the regulations.  Advocacy will continue to support research that informs this objective and will continue to seek out the best ideas and methodology to help accomplish it.    

Ordering Information

Copies are available for purchase from:

National Technical Information Service
5285 Port Royal Road
Springfield, VA 22161
(800) 553-6847 or (703) 605-6000
TDD: (703) 487-4639

Order number: Pending

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To view the complete report please see the attachment below.

Wednesday, September 1, 2010