by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Dustin Chambers, Patrick McLaughlin, and Laura Stanley of the Mercatus Center at George Mason University find a link between a larger government regulatory burden and higher poverty.
We estimate the impact of federal regulations on poverty rates in the 50 US states using the recently created Federal Regulation and State Enterprise (FRASE) index, which is an industry-weighted measure of the burden of federal regulations at the state level.
Controlling for manyother factors known to influence poverty rates, we find a robust, positive, and statistically significant relationship between the FRASE index and poverty rates across states. Specifically, we find that a 10 percent
increase in the effective federal regulatory burden on a state is associated withan approximate 2.5 percent increase in the poverty rate.
This paper fills an important gap in both the poverty and the regulation literature because it is the first paper to estimate the relationship between these variables. Moreover, our results have practical implications for federal
policymakers and regulators, because the increased poverty that results from additional regulations should be considered when weighing the costs and benefits of additional regulations.