Stratification by regulation: Are bootleggers and Baptists biased?
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This paper investigates whether and to what extent regulation may be associated with wage inequality. Using regulation measures created by Al-Ubaydli and McLaughlin (Regul Govern 11:109–123, 2017), I find that regulation is associated with larger within-occupation wage inequality. Specifically, I show that a worker at the 90th wage percentile realizes a raise of $1.19 per hour relative to the 10th percentile earner for each standard deviation increase in regulation. That represents a 3.5% raise for a worker at the 90th percentile. Overall, increases in the regulatory burden are associated with 42–45% of the change in the 90th–10th percentile wage ratio from 2002 through 2014.
KeywordsInequality Regulation Income Wages
JEL ClassificationD31 L51 L11 J31
I received valuable comments and suggestions from seminar participants at the 2017 Public Choice Society Meetings and the Institute for Economic Inquiry’s Mini Conference on the Regressive Effects of Regulation at Creighton University. I wish to extend my gratitude to Dustin Chambers, Angela K. Dills, Jeremy Horpedahl, Patrick McLaughlin, Nathan R. Murphy, Colin O’Reilly, William F. Shughart II, Michael Thomas, and Diana Weinert Thomas for their valuable insights and recommendations. Errors or deficiencies that have to this point survived this counsel are most assuredly mine alone.
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