Government Regulation and Income Inequality in the United States, 1970-1990

Abstract

While many studies of income inequality in the United States focus on the significance of declining marginal tax rates in the 1980s, very little research to date has considered the effect of government regulations which have increased dramatically during the time of marked increases in the Gini coefficient. This paper presents a simple Ordinary Least Squares regression suggesting a relationship between government regulation and income inequality. It is suggested that increases in the regulatory burden in the US labor market increases the cost of low skilled labor relative to high skilled labor, contributing to increases in income inequality.

Keywords: tax policy, income inequality, regulation, Gini Coefficients

JEL Classification: D31, D6, H2