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Regulation and Poverty: The Relationship

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More regulation makes more people poor. Dustin Chambers, Patrick McLaughlin, and Laura Stanley describe their new study:

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 many other 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% increase in the effective federal regulatory burden on a state is associated with an approximate 2.5% increase in the poverty rate. This paper fills an important gap in both the poverty and the regulation literatures because it is the first one to estimate the relationship between the two variables. 

[Dustin Chambers, Patrick McLaughlin, and Laura Stanley, “Regulation and the Occurrence of Poverty Across the US States,” Mercatus Center, October 30]

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