Federal regulations are often created to ensure that goods and services meet minimum standards of quality, but these frequently increase costs for firms. These costs disproportionally affect small businesses, resulting in the creation of fewer startups, less competition, and higher rates of poverty.

In their latest working paper, Dustin Chambers and Colin O’Reilly contend that the rise of income inequality and the increase of federal regulatory restrictions over the past two decades are linked. Using the Federal Regulation and State Enterprise (FRASE) index, the authors found that over a 20 year period, federal regulations may be responsible for a 4 percent increase in income inequality in the same period.