Never Letting a Crisis Go to Waste and the Ratcheting Effect of Regulation: Evidence from the COVID-19 Pandemic
Proponents of active policy intervention often argue that crises demand swift and expansive public policy for the purposes of public health or national safety. Even if such claims are accurate, however, these public policies often become permanent—the policies are maintained well after the crisis is over, which has become known as the “ratcheting effect” of regulation. The first part of this paper introduces new annual data on regulatory restrictions across each state between 2018 and 2020, which we show predicts standard measures of nonpharmaceutical interventions, such as stay-at-home orders and non-essential business closures. The second part of the paper uses these new data to document the ratcheting of regulatory restrictions related to COVID-19. We find that these regulations grew by 0.41% between 2019-2020, but by 0.72% between 2020-2021. The bulk of the increase is accounted for by Democrat states. Furthermore, we show that the correlation between political affiliation and regulatory growth cannot be explained by differences in demographic characteristics or even household income. Our results underscore the importance of additional scrutiny and accountability of government officials and the resulting policy during and after times of crisis.
