The Regressive Effects of Regulations in Pennsylvania

Summary of Study

Bottom line: The unintended consequences of federal regulations have had a significant impact on Pennsylvania's economy. Between 1997 and 2015, the effective federal regulatory burden upon Pennsylvania increased by 45 percent. This analysis quantifies this regulatory impact on poverty, income inequality, business creation, job loss, and prices. Though Pennsylvania cannot unilaterally reduce its federal regulatory burden, it can excise state-level red tape such as occupational licensing requirements to improve the economy.

Research suggests that economic regulations are positively correlated with poverty rates, income inequality, and consumer prices. In contrast, regulations are negatively correlated with entrepreneurship. Federal regulations between 1997 and 2015 have had the following regressive effects on Pennsylvania's economy:

  • 153,499 people living in poverty
  • 2.3 percent higher income inequality
  • 361 fewer businesses annually
  • 5,195 lost jobs annually
  • 7.35 percent higher prices

As for state-level regulations, Pennsylvania ranks 11 of 44 states for which data are available (where a rank of “1” is most burdensome).

A 10 percent increase in the effective federal regulatory burden upon a state is associated with about a 2.5 percent increase in the poverty rate. Federal regulations are associated with an increase in Pennsylvania’s poverty rate of 11.25 percent.

A 10 percent increase in the effective federal regulatory burden upon a state is associated with an approximate 0.5 percent increase in the state’s Gini coefficient. Federal regulations are associated with an increase in Pennsylvania's Gini coefficient of 2.3 percent.

A 10 percent increase in the number of regulatory restrictions pertaining to a particular industry is associated with a 0.42 percent reduction in the total number of small firms, along with a corresponding 0.55 percent reduction in small firm employment.

A 10 percent increase in federal regulations is associated with a 0.9 percent increase in consumer prices. Federal regulations are associated with an increase of 7.35 percent increase in consumer prices in Pennsylvania. 

Pennsylvania ranks 31 in the nation in terms of occupational licensure burden. It requires a license to work in 51 low-income occupations and requires an average of 117 days of education, training, or apprenticeships to obtain a license.

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