Regulation and growth

Regulations employed by the government to affect economic activity constitute an important policy instrument, and the total output production capacity of the economy could be affected accordingly. Investigation of the impact of regulations on economic growth underpins the basic premise of this study. Instead of Solow model which produces empirically consistent results but does not include human capital -an important determinant of growth-, Mankiw, Romer and Weil model which both produce consistent result and include human capital was used in the study. Within the framework of this model, in order to measure the influence of regulations on growth, a panel data set which consisted of 27 OECD countries between 1975 and 2010 was used. The regulations were stated for direct restriction of economic units decision as credit, labor and real market regulation index and for market-supporters as protection of property rights and legal structure index. The findings obtained from the analysis with the help of static and dynamic panel data models demonstrated direct intervention of the market-supporters in other words, the regulation as a restriction on economic units decision had a negative impact on the growth. In addition, it was concluded that marketer regulation as providing necessary environment for effective operation of market had positive influence on the growth. Key Words: Regulation and Growth.