Population and Regulation

with Andrei Shleifer

Abstract

We present a model of efficient regulation along the lines of Demsetz (1967). In this model, setting up and running regulatory institutions takes a fixed cost, and therefore jurisdictions with larger populations affected by a given regulation are more likely to have them. Consistent with the model, we find that higher population U.S. states have more pages of legislation and adopt particular laws earlier in their history. We also find that specific types of regulation, including the military draft, the regulation of entry, and the regulation of labor are more extensive in countries with larger populations. Overall, the data show that population is an empirically important determinant of regulation.