Published online by Cambridge University Press: 16 June 2005
Typical studies of regulatory impacts focus on how a narrowly defined regulation or class of regulations affects firm choice decisions. This approach yields results that inform about marginal impacts of adding an additional regulation, but can ignore interaction effects from already existing regulations. In this research, I use state labor laws to question how the regulatory burden represented by an entire class of laws affects firm choice decisions. To achieve this end, a comprehensive list of 135 labor regulations that existed in at least one state between 1899 and 1924 was collected. Temporal and regional trends in the passage of labor legislation are described. Significant inter-regional variability is found, with different parts of the nation favoring different classes of labor legislation. Evidence for the presence of intra-regional homogeneity is found. Outlier states that do not fit the overall regional pattern are identified and discussed. Four summary variables are developed using principal components analysis. These variables represent first-wave labor laws, second-wave labor laws, mining laws, and anti-union laws. First-wave laws were common laws passed in most states by 1909. These laws were general in nature and probably not binding on employers. Most states enacted second-wave laws after 1909. The pattern of passage of second-wave laws was more uniform than that of first-wave laws, with most states adopting the more progressive second-wave laws by 1924. Anti-union laws experienced relatively little growth, but were most common in the Southeast. Three of the four summary variables were incorporated into a four-input translog cost function model of state manufacturing establishments over the 1899 to1919 period. In addition, a variable representing state appropriations for labor programs and enforcement was included in the translog model. Increases in labor legislation resulted in an increase in demand for materials and salaried labor, and a decrease in demand for wage labor. Increases in the number of first-wave laws led to an increase in salaried labor demand, possibly due to bureaucratic requirements associated with regulatory compliance. First-wave laws had no impact on wage labor, confirming the findings of many that these early laws codified existing practice. In contrast, second-wave laws significantly reduced wage labor demand, suggesting that these laws were binding.