Measuring Government Policy with Text Analysis

Is government policy enhancing business activity or constraining it? Are government regulations becoming more or less business friendly? These and similar questions are ones that citizens and businesses ask every day, but we have only limited tools for measuring governments’ business policies, except through broad-brush surveys of regulatory environments. In this paper, we present a machine text analysis algorithm for extracting estimates of business friendliness from explanatory memoranda, an overlooked source of legislative text. We apply this new method to an original dataset of over 11,000 explanatory memoranda for a 10-year period in the United Kingdom (2005-2015), generating position estimates for UK government policy towards business across all regulatory fields and evaluating their validity against alternative measures.