The Effect of New Legislation on State Economies Within the United States of America

Abstract

Recently, there has been growing concern about the effects of over-regulation on society and economic growth. This paper studies the relationship between the growth of state legal codes and twelve economic outcomes across the United States of America between 1966 and 2012. Using state- and year-fixed effects methodology, this paper first replicates the results from Ash et al. (2025), confirming that a 10% increase in state provisions increases real GSP growth per capita by 0.146 to 0.152 percentage points, countrywide. To extend beyond Ash et al. (2025), this paper includes eleven additional economic outcome variables: state population, real GSP per capita, income, state patent creation, employment growth, business establishment growth, hires, job openings, layoffs and discharges, quits, and total separations. These are first estimated at the countrywide level. Then the sample is disaggregated into each of the four major census regions, the Midwest, Northeast, South, and West, where they are estimated again. At the national level, no additional economic outcome is statistically significant. Regional results are much more varied. In the Midwest, increases in state provisions are associated with significant declines in real GSP per capita, state population, income, patent creation, and total separations. In the Northeast, only state population declines significantly. In the South, income, patent creation, and employment growth all decrease significantly. However, in the West, increases in state provisions are associated with increases in real GSP growth per capita, income, and patent creation. These results provide a nuanced addition to existing literature and support this paper’s hypothesis that legislative proliferation harms state economies. They suggest that while national effects may be beneficial, high costs are concentrated in specific regions, especially those with older and more heavily regulated industrial bases.