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Exposure to Regulation and Income Inequality in Local Labor Markets: Evidence from the U.S. over the Past Half-Century

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  • Stoyanov, Andrey

    (York University, Canada)

  • Zubanov, Nick

    (University of Konstanz)

Abstract

Existing evidence points to a positive correlation between specific regulations and income inequality at a country or regional level, but little is known about how overall regulatory burden affects inequality at the local labor market level. Our study fills this gap by measuring local exposure to regulation from the industry-relevant articles of U.S. Code of Federal Regulation linked to local industry employment structure in 741 commuting zones (CZs) in the U.S. over the period 1970-2019. Relating our exposure to regulation measure to the CZ-level income inequality, computed from the Census records, we find that heavier regulation is followed by higher income inequality, lower average income and higher unemployment in the affected CZs. The implied effect estimates are sizeable and robust to various checks. We contribute to inequality research by identifying previously unknown, local effects of regulation on income inequality, exploring mechanisms through which they may occur, and demonstrating how available data can be used to produce more granular measures of exposure to regulation.

Suggested Citation

  • Stoyanov, Andrey & Zubanov, Nick, 2025. "Exposure to Regulation and Income Inequality in Local Labor Markets: Evidence from the U.S. over the Past Half-Century," IZA Discussion Papers 17820, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17820
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    More about this item

    Keywords

    employment; inequality; income; regulation; local labor market;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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