Costs of Compliance in Small and Moderate-Sized Businesses

摘要

The paper considers theoretical reasons for expecting small businesses (less than 50 employees) to have more variable, but on average proportionately higher, costs of compliance with government requirements than moderate-sized businesses (50 or more employees). Tension between not complying (with a low probability of being detected and paying the costs thereof) and complying (with high time and money costs per dollar of revenue), result in varied choices for a sample of small businesses but proportionately high costs for those that comply. Moderate-sized businesses are likely to incur lower costs per dollar of revenue when they do comply because many costs are invariant with respect to firm size. Moderate-sized businesses are also more likely to comply because they are more apt to be caught if they do not comply. Empirical tests of this theory for a Washington State sample of small - and moderate - sized sample of businesses confirm that small businesses report higher mean costs but greater variability across firms than moderate-sized businesses.