Regulation and income inequality in the United States

Dustin Chambers and Colin O'Reilly

European Journal of Political Economy, 2022, vol. 72, issue C

Abstract: Income inequality in the United States has risen over the past several decades. Over the same period, federal regulatory restrictions have increased. An emerging literature shows that regulations can have regressive effects on the distribution of income, exacerbating inequality. The Federal Regulation and State Enterprise (FRASE) index quantifies the regulatory restrictions that apply to each US state by industrial composition. We construct a panel of 50 US states from 1997 to 2015 to test whether states exposed to more federal regulatory restrictions have higher levels of income inequality. The results indicate that a 10 percent increase in federal regulation is associated with an approximate 0.5 percent increase in income inequality as measured by the Gini coefficient. When states are rank-ordered by average Gini coefficient, a 0.5 percent increase in income inequality will typically result in a two-position decline in state ranking.

Keywords: Regulation; Income inequality; FRASE; Regressive effects (search for similar items in EconPapers)
JEL-codes: D31 D63 L51 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Regulation and Income Inequality in the United States (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:72:y:2022:i:c:s0176268021000872

DOI: 10.1016/j.ejpoleco.2021.102101

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