Entry Regulations and Income Inequality at the Regional Level

We combine entry regulation data from the World Bank's subnational Doing Business Index with regional income inequality data from the OECD to test the relationship between entry regulation and income inequality at the subnational level. Controlling for other factors known to affect income inequality, we nd that a one percentage point increase in entry costs (expressed as a percentage of national per capita income) is associated with an increase in regional inequality (measured via the 80/20 income percentile ratio) of just over three percent. These results suggest that uniform national regulations may have disparate regional effects, as compliance costs may vary by subnational region.