Population Predicts Regulation

Texas is one of the most regulated states in the country.

This is one of the surprises that emerged from the State RegData project, which quantifies the number of regulatory restrictions in force in each state. It turns out that a state’s population size, rather than political ideology or any thing else, is the best predictor of its regulations.

This is what I found, with my coauthors James Broughel and Patrick McLaughlin, when we set out to test whether a previous paper (Mulligan and Shliefer 2005) that showed a regulation-population link held up when we used the better data that is now available. We found that across states, a doubling of population size is associated with a 22 to 33 percent increase in regulation.

The relationship between regulation and population is surprisingly robust- it also holds for Australian states and Canadian provinces, and based on the limited data we have seems to hold across countries too (for instance, the “free market” United States has 10 times as many regulations as Canada- just as it has 10 times the population).

What is less clear is why this relationship is so strong. Mulligan and Shleifer attribute it to a fixed cost of regulating; larger polities can spread this cost over more people, making the average cost of regulating cheaper, so they do it more. We note two other explanations: larger polities might have more externalities worth regulating, or if regulation produces concentrated benefits and dispersed costs, a larger population could make it harder for those harmed by regulation to organize collectively to oppose it.

Our article just came out in the Journal of Public Finance and Public Choice; if you don’t have access to it, you can find the ungated working paper version at Mercatus.

5 thoughts on “Population Predicts Regulation

  1. Vishnu Modur July 2, 2021 / 7:34 am

    Very interesting. How would you relate this finding to a country like India? It has a massive population with diverse sub cultures spread across a diverse geographical setting. The population of India at the time of its independence from the British rule was the same as current US population. I don’t have the numbers but we all know intuitively that India has far more regulation on paper than one can imagine, even for its size. This excess regulation might be a spillover from the colonial rule, but even with a weak state [after the colonial rule] and a massive population, the regulation only increases. Doesn’t the cost of regulation also depend on the strength of the state that puts it into effect? Can India deregulate to some extent?


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