Occupational Licensing and Minorities: A Reply to Klein, Powell, and Vorotnikov

In this paper we respond to Daniel Klein, Benjamin Powell, and Evgeny Vorotnikov’s (henceforth KPV) critique of our 2009 Journal of Law and Economics paper on the effects of occupational regulation on the employment of female and black workers. Our view is that KPV have not successfully made the case that our study is “rife with problems,” that our findings are “simply spurious correlations,” and that our conclusions are “highly doubtful.” In our reply we take on each of KPV’s criticisms. Specifically, we demonstrate that neither (1) our use of census data; nor (2) the problem of uneven enforcement of licensing laws; nor (3) measurement error in the timing and stringency of licensing laws; nor (4) the omitted variables that KPV identify systematically bias our estimates in favor of finding positive effects. In each of these instances, we show that the problems that KPV have identified would either bias our estimates toward zero or in the opposite direction of what we do find. Additionally, we argue that KPV’s falsification tests do not clearly show that our empirical methodology is biased. Finally, we estimate new regressions in light of KPV’s suggestions and find results that are consistent with our original conclusions. Accordingly, KPV have failed to mount a persuasive critique of our original paper.