Less Red Tape more Green Shoots? Idaho's regulatory reforms and Entrepreneurial Dynamism

Abstract In 2019, Idaho underwent significant regulatory reforms, after which every existing regulation must be reviewed and justified by 2026, and every newly introduced regulation must be reviewed and justified every 5 years; otherwise, the regulation is repealed. Idaho is now the least regulated state in the United States. I study the effects of Idaho's regulatory reforms on entrepreneurial activity. Prior evidence suggests regulatory barriers may act as a barrier for new entrants into the market, thereby suppressing entrepreneurial dynamism. Using a contiguous county Difference in Differences model, I find that business applications in Idaho increased by 9% relative to the control group following the reforms. This translated into a 7% increase in the amount of firms with 500 or more employees, and a 6% increase in establishments with 500 or more employees. However, no statistically significant increases in firm or establishment counts with fewer than 500 employees were identified. JEL Classification: L51; L26