Measurement of regulatory burden

From Pennsylvanians Are Leaving – But Shapiro, Lawmakers Can Inspire Them to Stay by Nathan Benefield.  

The same old Blue-state story.  People are leaving and not returning.  Wealth and taxable income leaves with them.  The causal factors are cost of living, income taxes, all taxes, crime, difficult business environment exacerbated by excess regulations, etc.  

Benefield does far better than most to flesh out the story with actual metrics.

Many have already left. According to U.S. Census Bureau data, Pennsylvania lost about 40,000 residents between July 2021 and July 2022. Only seven states suffered larger out-migrations during the same period.

The out-migration from Pennsylvania is part of a broader southward migration in the United States, as people flee northern blue states in favor of southern red states. Bloomberg recently reported on a massive movement of Americans – lured by “warmer weather, lower taxes, looser regulation, and cheaper housing” – to Florida, Texas, Georgia, the Carolinas, and Tennessee. These six states, dubbed the “New New South,” now contribute more to the national gross domestic product (GDP) than the Northeast.

Of this region’s major cities, Philadelphia is suffering one of the worst exoduses. Between July 2021 and July 2022, Philadelphia lost about 22,000 residents – a 1.4% drop and the largest one-year decline since 1977, according to Census data.

This mass departure hurts Philadelphia’s economy. Based on Internal Revenue Service data, Philadelphia lost $3.8 billion in adjusted gross income from outmigration taking place in 2020ؘ–21.

But Philadelphia has one thing going for itself: at least it’s not New York City. The pandemic was particularly hard on the Big Apple. In 2021 and 2022, New York City lost the most people (more than 400,000 total, or 4.6%); Philadelphia ranked third on this measure in 2022.

New York lost more jobs, too. From February 2020 to April 2021, New York City suffered a 12% decline in jobs – roughly three times the national average. (Comparatively, Philadelphia lost 9%.) New York City has recouped fewer than half of the jobs it lost during the pandemic, leaving the city with a deficit of half a million jobs.

So definitely a real problem and not just mainstream media kvetching.  What caught my eye as out of the ordinary was this.

There is no shortage of red tape for Shapiro and Pennsylvania lawmakers to cut. Pennsylvania enforces 166,219 regulatory restrictions, 22% more than the national average.

That link goes to QuantGov, an outfit who have developed a mechanism for counting the number of regulations in each state.  I don't have any visibility into the strengths or weaknesses of the mechanism but the results align with both my experience and by national reputation.

QuantGov is part of the Mercatus Center at George Mason University.  They are by reputation more Hayekian than Keynesian but not particularly politically partisan.  

By state, the usual suspects for too great a regulatory burden which crushes business formation and increases costs are top of the list.

Click to enlarge.

By geography:

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Some random thoughts.

There is an unacknowledged set of contexts and path dependencies.

You would expect states with diverse economies to (appropriately) have more regulations than those with a single industry.

You would expect certain dangerous sectors (manufacturing, extractive, hydrocarbon) to attract a greater regulatory burden than otherwise.

You would expect dense states to have more regulations than less dense states.

You would expect older states with longer histories to perhaps have greater burdens.

The number of regulatory burdens may be a crude measure of suppression of the business environment.  Or not.  

The magnitude of the variance (36k versus 404k) is striking and probably predictive.  

Texas seems an odd-man out.  Famous for business dynamism but with the fifth largest regulatory burden.  Possibly because it has an unusually diverse economy (agriculture, extractive, manufacturing, logistics, services, etc.)

But, overall, this seems to fit the stereotypes and matches the outflow states with the destination state.  In other words, states with the largest regulatory burdens have the highest taxes, highest costs, and the greatest loss of population to the least regulated states.  

Of course, this sort of novel measurement and unscrutinized methodologies invites Just So stories.  But it does pass the sniff test.