New dimensions of regulatory complexity and their economic cost. An analysis using text mining

Abstract

Complex or poorly drafted regulations are more difficult for economic agents to implement, eroding economic efficiency. The literature has so far concentrated on the analysis of regulatory complexity as a phenomenon related to the “quantity” of norms. Regulation can also be complex because of “qualitative” reasons such as its linguistic ambiguity or its relational structure (references between legal documents). This article innovates by analyzing these new dimensions of complexity: we develop new indicators for legibility and regulatory interconnectedness. To do so, we constructed a new database (RECOS - Regulatory Complexity in Spain) extracting information from 8,171 norms (61 million words) covering the regulation set of all the Spanish autonomous regions. We analyze the relationship between these new indicators and productivity (as a relevant economic variable) and judicial efficacy (as a relevant institutional-structural variable). While each of these areas should be analyzed in separate articles, this research shows that the new dimensions of regulation complexity matter and also have significant results.