Stratification by regulation: Are bootleggers and Baptists biased?
- 69 Downloads
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.
- Acemoglu, D. (1999). Changes in unemployment and wage inequality: An alternative theory and some evidence. American Economic Review, 89, 1259–1278.Google Scholar
- Acemoglu, D., & Autor, D. (2011). Skill, tasks and technologies: Implications for employment earnings. In O. Ashenfelter & D. Card (Eds.), The handbook of labor economics (Vol. 4b). Amsterdam: Elsevier.Google Scholar
- Acemoglu, D., & Autor, D. (2012). What does human capital do? A review of Goldin and Katz’s the race between education and technology. Journal of Economic Literature, 50(2), 426–463.Google Scholar
- Al-Ubaydli, O., & McLaughlin, P. A. (2017). RegData: A numerical database on industry-specific regulations for all United States industries and federal regulations, 1997–2012. Regulation & Governance, 11, 109–123.Google Scholar
- Alvaredo, F., Atkinson A. B., Piketty, T., & Saez, E. (2014). The world top incomes database. http://topincomes.g-mond.parisschoolofeconomics.eu/. Viewed April 15, 2016.
- Ashby, N. J., & Sobel, R. S. (2008). Income inequality and economic freedom in the U.S. states. Public Choice, 134, 329–346.Google Scholar
- Atkinson, A. B., & Piketty, T. (Eds.). (2007). Top incomes over the twentieth century: A contrast between continental European and English-speaking countries. Oxford: Oxford University Press.Google Scholar
- Atkinson, A. B., & Piketty, T. (Eds.). (2010). Top incomes: A global perspective. Oxford: Oxford University Press.Google Scholar
- Autor, D. H., Katz, L., & Kearney, M. L. (2008). Trends in U.S. wage inequality: Re-assessing the revisionists. Review of Economics and Statistics, 90(2), 300–323.Google Scholar
- Autor, D., Katz, L., & Krueger, A. (1998). Computing inequality: Have computers changed the labor market? Quarterly Journal of Economics, 113, 1169–1214.Google Scholar
- Autor, D. H., Levy, F., & Murnane, R. J. (2003). The skill content of recent technological change: An empirical exploration. Quarterly Journal of Economics, 116(4), 1279–1333.Google Scholar
- Autor, D. H., Manning, A., & Smith, C. L. (2016). The contribution of the minimum wage to U.S. wage inequality over three decades: A Reassessment. American Economic Journal Applied Economics, 8(1), 58–99.Google Scholar
- Blau, F. D., & Kahn, L. M. (1996). International differences in male wage inequality: Institutions versus market forces. Journal of Political Economy, 104, 791–837.Google Scholar
- Borjas, G., Freeman, R., & Katz, L. (1997). How much do immigration and trade affect labor market outcomes? Brookings Papers on Economic Activity, 1, 1–90.Google Scholar
- Bound, J., & Johnson, G. (1992). Changes in the structure of wages in the 1980s: An evaluation of alternative explanations. American Economic Review, 83, 371–392.Google Scholar
- Calderón, C., & Chong, A. (2009). Labor market institutions and income inequality: An empirical exploration. Public Choice, 138(1), 65–81.Google Scholar
- Card, D. (2009). Immigration and inequality. American Economic Review, 99(2), 1–21.Google Scholar
- Card, D., & DiNardo, J. (2002). Skill biased technological change and rising wage inequality: Some problems and puzzles. Journal of Labor Economics, 20(4), 733–783.Google Scholar
- Card, D., Lemieux, T., & Riddell, W. C. (2004). Unions and wage inequality. Journal of Labor Research, Transaction Publishers, 25(4), 519–562.Google Scholar
- Caselli, F. (1999). Technological revolutions. American Economic Review, 89, 78–102.Google Scholar
- Coffey, B., McLaughlin, P. A., & Tollison, R. D. (2012). Regulators and redskins. Public Choice, 153, 191–204.Google Scholar
- Congressional Budget Office. (2011). Trends in the distribution of household income between 1979 and 2007. Washington, DC: The Congress of the United States.Google Scholar
- Congressional Budget Office. (2013). The distribution of household income and federal taxes, 2013. The Congress of the United States, Washington, DC. (supplemental data: www.cbo.gov/publication/51361).
- Crain, W. M., & Hopkins, T. D. (2001). The impact of regulatory costs on small firms. Report SBAHQ-00-R- 0027, Office of Advocacy, U.S. Small Business Administration, Washington, DC.Google Scholar
- Crews, C. W. (2011). Ten thousand commandments: An annual snapshot of the Federal regulatory state. Washington, DC: Competitive Enterprise Institute.Google Scholar
- Dawson, J. W., & Seater, J. J. (2013). Federal regulation and aggregate economic growth. Journal of Economic Growth, 18(2), 137–177.Google Scholar
- DiNardo, J., Fortin, N. M., & Lemieux, T. (1996). Labor market institutions and the distribution of wages, 1973–1992: A semiparametric approach. Econometrica, 64(5), 1001–1044.Google Scholar
- Frank, M. W. (2009). Inequality and growth in the United States: Evidence from a new state-level panel of income inequality measure. Economic Inquiry, 47(1), 55–68.Google Scholar
- Freeman, R. B. (1991). How much has de-unionisation contributed to the rise in male earnings inequality? NBER Working Papers 3826, National Bureau of Economic Research, Inc.Google Scholar
- Geloso, V., Magness, P. W., Moore, J. A., & Schlosser, P. D. (2017). Is the U-Curve that pronounced? Revisiting income inequality in the United States, 1917–1945. Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2985234.
- Goldberg, P., & Pavcnik, N. (2007). Distributional effects of globalization in developing countries. Journal of Economic Literature, 45(1), 39–82.Google Scholar
- Goos, M., & Manning, A. (2007). Lousy and lovely jobs: The rising polarization of work in Britain. Review of Economics and Statistics, 89, 118–133.Google Scholar
- Gottschalk, P. (1997). Inequality, income growth, and mobility: The basic facts. Journal of Economic Perspectives, 11(2), 21–40.Google Scholar
- Greenwood, J., Guner, N., Kocharkov, G., & Santos, C. (2014). Marry your like: Assortative mating and income inequality. American Economic Review (Papers and Proceedings), 104(5), 348–353.Google Scholar
- Harrington, W. (2006). Grading estimates of the benefits and costs of Federal Regulation: A review of reviews. Discussion paper 06‐39. Resources for the Future, Washington, DC.Google Scholar
- Harrington, W., Morgenstern, R. D., & Nelson, P. (2000). On the accuracy of regulatory cost estimates. Journal of Policy Analysis and Management., 19(2), 297–322.Google Scholar
- Helpman, E., Itskhoki, O., Muendler, M., & Redding, S. J. (2017). Trade and inequality: From theory to estimation. The Review Economic Studies, 84(1), 357–405.Google Scholar
- Howell, D. (1994). The collapse of low-skill male earnings in the 1980s: Skill mismatch or shifting wage norms? Levy Institute Working Paper. No 105.Google Scholar
- Howell, D. (1999). Theory driven facts and the growth of earnings inequality. Review of Radical Political Economics, 31(1), 54–86.Google Scholar
- Juhn, C., Murphy, K., & Pierce, B. (1993). Wage inequality and the rise in returns to skill. Journal of Political Economy, 101, 401–442.Google Scholar
- Katz, L., & Murphy, K. (1992). Changes in relative wages: Supply and demand factors. Quarterly Journal of Economics, 107, 35–78.Google Scholar
- Kim, C., & Sakamoto, A. (2008). The rise of intra-occupational wage inequality in the United States, 1983 to 2002. American Sociological Review, 73, 129–157.Google Scholar
- Kuznets, S. (1953). Shares of upper income groups in income and savings. Cambridge, MA: National Bureau of Economic Research.Google Scholar
- Lee, D. S. (1999). Wage inequality in the United States during the 1980s: Rising dispersion or falling minimum wage? Quarterly Journal of Economics, 114(3), 977–1023.Google Scholar
- McLaughlin, P. A., & Stanley, L. (2016). Regulation and income inequality: The regressive effects of entry regulations. Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA.Google Scholar
- Mechling, G., Miller, S., & Konecny, R. (2017). Do Piketty and Saez misstate income inequality? Critiquing the critiques. Review of Political Economy, 29(1), 30–46.Google Scholar
- Mishel, L., Bernstein, J., & Schmitt, J. (1997). The state of working America 1996–1997. M.E. Sharpe: Economic Policy Institute.Google Scholar
- Mishel, L., Shierholtz, H., & Schmitt, J. (2013). Don’t blame the robots: assessing the job polarization explanation of growing wage inequality. Economic Policy Institute- Centre for Economic Policy Research. Working paper.Google Scholar
- Murphy, K. M., & Welch, F. (1992). The structure of wages. Quarterly Journal of Economics, 107(1), 285–326.Google Scholar
- Office of Management and Budget. (2005). Validating regulatory analysis: 2005 report to Congress on the costs and benefits of federal regulations and unfunded mandates on state, local, and tribal entities. http://www.whitehouse.gov/omb/inforeg/regpol‐reports_congress.html.
- Ottaviano, G., & Peri, G. (2006). Rethinking the effects of immigration on wages. National Bureau of Economic Research Working Paper 12497.Google Scholar
- Piketty, T. (2003). Income inequality in France, 1901–1998. Journal of Political Economy, 111(5), 1004–1042.Google Scholar
- Piketty, T., & Saez, E. (2003). Income inequality in the United States, 1913–1998. Quarterly Journal of Economics, 118(1), 1–39. (Longer updated version published in A.B. Atkinson and T. Piketty eds., Oxford University Press, 2007) (Tables and Figures Updated to 2012 in Excel format, September 2013).Google Scholar
- Smith, A., & Yandle, B. (2014). Bootleggers and Baptists: How economic forces and moral persuasion interact to shape regulatory politics. Washington, DC: Cato Institute.Google Scholar
- Spletzer, J. R., & Handwerker, E. W. (2014). Measuring the distribution of wages in the United States from 1996–2010 with the Occupational Employment Survey. Monthly Labor Review. Bureau of Labor Statistics. 1–20. https://www.bls.gov/opub/mlr/2014/article/pdf/measuring-the-distribution-of-wages-in-the-united-states-from-1996-through-2010-using-the-occupational-employment-survey.pdf. Viewed May 15, 2017.
- United States Bureau of Labor Statistics. Various year. Occupational Employment Statistics (OES). https://www.bls.gov/oes/.
- United States Census Bureau. (2018). Current Population Survey, Annual Social and Economic Supplements, Table H-2. https://www.census.gov/hhes/www/income/data/historical/household/. Viewed June 13, 2018.
- United States Census Bureau. Various years. Statistics of U.S. Businesses (SUSB). https://www.census.gov/programs-surveys/susb.html.
- Western, B., & Rosenfeld, J. (2011). Unions, norms, and the rise in U.S. Wage inequality. American Sociological Review, 76, 513–537.Google Scholar
- Wheeler, C. H. (2005). Evidence on wage inequality, worker education, and technology. Federal Reserve Bank of St. Louis Review, 87(3), 375–393.Google Scholar
- Yandle, Bruce. (1983). Bootleggers and Baptists: The education of a regulatory economist. Regulation, 7(3), 12–16.Google Scholar