IDEAS home Printed from https://ideas.repec.org/a/bla/joares/v59y2021i1p111-161.html
   My bibliography  Save this article

Labor Market Effects of Spatial Licensing Requirements: Evidence from CPA Mobility

Author

Listed:
  • STEFANO CASCINO
  • ANE TAMAYO
  • FELIX VETTER

Abstract

We exploit the staggered introduction of CPA Mobility provisions in the United States to study the effects of spatial licensing requirements on the labor market for accounting professionals. Specifically, we examine whether the removal of licensing‐induced geographic barriers affects CPA wages and employment levels, as well as the pricing and quality of professional services. We find that, subsequent to the adoption of CPA Mobility provisions, wages of accounting professionals decrease, whereas employment levels are unaffected. The documented wage effect stems from smaller CPA firms, is more pronounced for CPAs holding senior positions, and persists over time. We also find that service prices decline and that this effect is concentrated in local CPA firms. Moreover, we document that the increased wage and price pressure is not associated with deteriorating service quality. Collectively, our results suggest that the removal of occupational licensing barriers has sizable effects on labor supply and service prices. Our findings inform the current regulatory debate on occupational licensing.

Suggested Citation

  • Stefano Cascino & Ane Tamayo & Felix Vetter, 2021. "Labor Market Effects of Spatial Licensing Requirements: Evidence from CPA Mobility," Journal of Accounting Research, Wiley Blackwell, vol. 59(1), pages 111-161, March.
    • Handle: RePEc:bla:joares:v:59:y:2021:i:1:p:111-161
    DOI: 10.1111/1475-679X.12342
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1475-679X.12342
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1475-679X.12342?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Raphael Duguay & Michael Minnis & Andrew Sutherland, 2020. "Regulatory Spillovers in Common Audit Markets," Management Science, INFORMS, vol. 66(8), pages 3389-3411, August.
    3. Morris M. Kleiner & Alan B. Krueger, 2010. "The Prevalence and Effects of Occupational Licensing," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 676-687, December.
    4. Cook, Jonathan & Kowaleski, Zachary T. & Minnis, Michael & Sutherland, Andrew & Zehms, Karla M., 2020. "Auditors are known by the companies they keep," Journal of Accounting and Economics, Elsevier, vol. 70(1).
    5. Chiara Criscuolo & Luis Garicano, 2010. "Offshoring and Wage Inequality: Using Occupational Licensing as a Shifter of Offshoring Costs," American Economic Review, American Economic Association, vol. 100(2), pages 439-443, May.
    6. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    7. Christian Leuz, 2018. "Evidence-based policymaking: promise, challenges and opportunities for accounting and financial markets research," Accounting and Business Research, Taylor & Francis Journals, vol. 48(5), pages 582-608, July.
    8. Jonathan M. Karpoff & Michael D. Wittry, 2018. "Institutional and Legal Context in Natural Experiments: The Case of State Antitakeover Laws," Journal of Finance, American Finance Association, vol. 73(2), pages 657-714, April.
    9. DeFond, Mark L. & Lennox, Clive S., 2011. "The effect of SOX on small auditor exits and audit quality," Journal of Accounting and Economics, Elsevier, vol. 52(1), pages 21-40, June.
    10. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    11. Joseph Gerakos & Chad Syverson, 2015. "Competition in the Audit Market: Policy Implications," Journal of Accounting Research, Wiley Blackwell, vol. 53(4), pages 725-775, September.
    12. Maurizi, Alex, 1974. "Occupational Licensing and the Public Interest," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 399-413, Part I, M.
    13. Doogar, Rajib & Easley, Robert F., 1998. "Concentration without differentiation: A new look at the determinants of audit market concentration," Journal of Accounting and Economics, Elsevier, vol. 25(3), pages 235-253, June.
    14. Emily Oster, 2019. "Unobservable Selection and Coefficient Stability: Theory and Evidence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(2), pages 187-204, April.
    15. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    16. Simon Rottenberg, 1980. "Occupational Licensure and Regulation," Books, American Enterprise Institute, number 968900, September.
    17. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
    18. Clifford Winston & Quentin Karpilow, 2016. "Should the US Eliminate Entry Barriers to the Practice of Law? Perspectives Shaped by Industry Deregulation," American Economic Review, American Economic Association, vol. 106(5), pages 171-176, May.
    19. Christina Gathmann & Uta Schönberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, January.
    20. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    21. Charles Cullinan, 1997. "Audit Pricing in the Pension Plan Audit Market," Accounting and Business Research, Taylor & Francis Journals, vol. 27(2), pages 91-98.
    22. Arlene S. Holen, 1965. "Effects of Professional Licensing Arrangements on Interstate Labor Mobility and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 73(5), pages 492-492.
    23. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    24. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    25. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    26. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    27. Christina DePasquale & Kevin Stange, 2016. "Labor Supply Effects of Occupational Regulation: Evidence from the Nurse Licensure Compact," NBER Working Papers 22344, National Bureau of Economic Research, Inc.
    28. DeFond, Mark & Zhang, Jieying, 2014. "A review of archival auditing research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 275-326.
    29. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kihwan Bae & Edward Timmons, 2023. "Now You Can Take It with You: Effects of Occupational Credential Recognition on Labor Market Outcomes," Working Papers 23-03, Department of Economics, West Virginia University.
    2. De Simone, Lisa & Klassen, Kenneth J. & Seidman, Jeri K., 2022. "The effect of income-shifting aggressiveness on corporate investment," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    3. Breuer, Matthias & Le, Anthony & Vetter, Felix, 2023. "Audit mandates, audit firms, and auditors," Working Papers 333, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    4. ED deHAAN & NAN LI & FRANK S. ZHOU, 2023. "Financial Reporting and Employee Job Search," Journal of Accounting Research, Wiley Blackwell, vol. 61(2), pages 571-617, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cascino, Stefano & Tamayo, Ane & Vetter, Felix, 2020. "Labor market effects of spatial licensing requirements: evidence from CPA mobility," LSE Research Online Documents on Economics 107054, London School of Economics and Political Science, LSE Library.
    2. Breuer, Matthias & Le, Anthony & Vetter, Felix, 2023. "Audit mandates, audit firms, and auditors," Working Papers 333, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    3. John M. Barrios, 2022. "Occupational Licensing and Accountant Quality: Evidence from the 150‐Hour Rule," Journal of Accounting Research, Wiley Blackwell, vol. 60(1), pages 3-43, March.
    4. Alicia Plemmons, 2022. "Occupational licensing's effects on firm location and employment in the United States," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 735-760, December.
    5. Eric James Stokan, 2019. "An Estimate of the Local Economic Impact of State-Level Earned Income Tax Credits," Economic Development Quarterly, , vol. 33(3), pages 170-186, August.
    6. Raphael Duguay & Michael Minnis & Andrew Sutherland, 2020. "Regulatory Spillovers in Common Audit Markets," Management Science, INFORMS, vol. 66(8), pages 3389-3411, August.
    7. Mario Pagliero, 2019. "Occupational Licensing in the EU: Protecting Consumers or Limiting Competition?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 137-153, August.
    8. Stefano Cascino & Maria Correia & Ane Tamayo, 2019. "Does Consumer Protection Enhance Disclosure Credibility in Reward Crowdfunding?," Journal of Accounting Research, Wiley Blackwell, vol. 57(5), pages 1247-1302, December.
    9. De los Santos, Babur & Kim, In Kyung & Lubensky, Dmitry, 2018. "Do MSRPs decrease prices?," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 429-457.
      • Babur De los Santos & In Kyung Kim & Dmitry Lubensky, 2013. "Do MSRPs Decrease Prices?," Working Papers 2013-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    10. Zhigang Li & Hangtian Xu, 2018. "High‐speed railroads and economic geography: Evidence from Japan," Journal of Regional Science, Wiley Blackwell, vol. 58(4), pages 705-727, September.
    11. Morris M. Kleiner & Evan J. Soltas, 2019. "A Welfare Analysis of Occupational Licensing in U.S. States," NBER Working Papers 26383, National Bureau of Economic Research, Inc.
    12. Ehrich, Malte & Munasib, Abdul & Roy, Devesh, 2018. "The Hartz reforms and the German labor force," European Journal of Political Economy, Elsevier, vol. 55(C), pages 284-300.
    13. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    14. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    15. Karen Maguire & Abdul Munasib, 2013. "Do Renewables Portfolio Standards Increase Electricity Prices? A Synthetic Control Approach," Economics Working Paper Series 1403, Oklahoma State University, Department of Economics and Legal Studies in Business, revised Aug 2013.
    16. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    17. Wing, Coady & Marier, Allison, 2014. "Effects of occupational regulations on the cost of dental services: Evidence from dental insurance claims," Journal of Health Economics, Elsevier, vol. 34(C), pages 131-143.
    18. Belman, Dale. & Wolfson, Paul J., 2016. "What does the minimum wage do in developing countries? : A review of studies and methodologies," ILO Working Papers 994893283402676, International Labour Organization.
    19. Eleanor Golightly & Pamela Meyerhofer, 2022. "Does Paid Family Leave Cause Mothers to Have More Children? Evidence from California," Journal of Labor Research, Springer, vol. 43(2), pages 203-238, June.
    20. Campos Vázquez, Raymundo Miguel & Rodas Milián, James Alexis, 2020. "El efecto faro del salario mínimo en la estructura salarial: evidencias para México," El Trimestre Económico, Fondo de Cultura Económica, vol. 87(345), pages 51-97, enero-mar.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:joares:v:59:y:2021:i:1:p:111-161. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-8456 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.