February, 2018

Regressive Effects of Regulation on Wages

  • Diana Thomas

    Associate Professor, Economics and Finance Department, Creighton University
  • James Bailey

    Assistant Professor, Creighton University
  • Joseph Anderson

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Find the Article at Public Choice.

A growing body of literature analyzing the distributive consequences of regulation suggests that regulation may have particularly detrimental effects on lower-income households. Regulation can be regressive if it represents the preferences of the wealthy while imposing costs on all households. The specific channel through which regulation may impose costs on lower-income households is its effects on prices and wages. In this issue, Chambers et al. (Public Choice.  https://doi.org/10.1007/s11127-017-0479-z2017) investigate the impact of regulation on prices. They find that regulation raises consumer prices; regulatory interventions therefore are regressive because lower income consumers tend to spend larger percentages of their budgets on regulated goods and services. In this paper, we seek to analyze the effect of regulation on wages across different income levels and occupations.