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Analyzing occupational licensing among the states

Author

Listed:
  • Morris M. Kleiner

    (University of Minnesota, NBER
    Federal Reserve Bank of Minneapolis)

  • Evgeny Vorotnikov

    (Fannie Mae)

Abstract

The study provides new evidence of the influence of occupational regulations on the U.S. economy. Our analysis, unlike previous studies, was able to obtain a representative sample of the population at the state level, which allowed us to estimate the cross-sectional effects of occupational licensing for each state. The state-level analysis demonstrates considerable variation in percentage of the workforce that has attained a license, and unlike minimum wages or unionization, licensing shows no regional patterns in the distribution of occupational licensing. The analysis also shows considerable variation in the influence of licensing on earnings across the states. The national estimates suggest that occupational licensing raises wages by about 11% after controlling for human capital and other observable characteristics. Finally, our analysis shows the influence of occupational regulation on wage inequality across the income distribution.

Suggested Citation

  • Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    • Handle: RePEc:kap:regeco:v:52:y:2017:i:2:d:10.1007_s11149-017-9333-y
    DOI: 10.1007/s11149-017-9333-y
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    References listed on IDEAS

    as
    1. 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.
    2. Morris M. Kleiner & Allison Marier & Kyoung Won Park & Coady Wing, 2016. "Relaxing Occupational Licensing Requirements: Analyzing Wages and Prices for a Medical Service," Journal of Law and Economics, University of Chicago Press, vol. 59(2), pages 261-291.
    3. Morris M. Kleiner, 2006. "Licensing Occupations: Ensuring Quality or Restricting Competition?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lo, November.
    4. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
    5. Morris M. Kleiner & Alan B. Krueger, 2013. "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 173-202.
    6. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-895, October.
    7. Carl Shapiro, 1986. "Investment, Moral Hazard, and Occupational Licensing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(5), pages 843-862.
    8. Milton Friedman & Simon Kuznets, 1945. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, March.
    9. Morris M. Kleiner, 2000. "Occupational Licensing," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 189-202, Fall.
    10. Richard B. Freeman, 1982. "Union Wage Practices and Wage Dispersion within Establishments," ILR Review, Cornell University, ILR School, vol. 36(1), pages 3-21, October.
    11. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
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    Citations

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    Cited by:

    1. Morikawa, Masayuki, 2018. "Occupational licenses and labor market outcomes in Japan," Japan and the World Economy, Elsevier, vol. 48(C), pages 45-56.
    2. Trey Malone & Antonios M. Koumpias & Per L. Bylund, 2019. "Entrepreneurial response to interstate regulatory competition: evidence from a behavioral discrete choice experiment," Journal of Regulatory Economics, Springer, vol. 55(2), pages 172-192, April.
    3. 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.
    4. Tingting Zhang & Morley Gunderson, 2020. "Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018," Journal of Labor Research, Springer, vol. 41(4), pages 338-351, December.
    5. Andrew Smith & Graham Brownlow, 2023. "Informal Institutions as Inhibitors of Rent-Seeking Entrepreneurship: Evidence From U.S. Legal History," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2323-2346, November.
    6. Morris M. Kleiner & Ming Xu, 2020. "Occupational Licensing and Labor Market Fluidity," NBER Working Papers 27568, National Bureau of Economic Research, Inc.
    7. 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.
    8. Chambers, Dustin & O'Reilly, Colin, 2022. "Regulation and income inequality in the United States," European Journal of Political Economy, Elsevier, vol. 72(C).
    9. Noah J. Trudeau, 2021. "Occupational Licensing and Intra-MSA Effects: Massage Therapists in the US," Working Papers 21-03, Department of Economics, West Virginia University.
    10. Dick M. Carpenter & Lisa Knepper & Kyle Sweetland & Jennifer McDonald, 2018. "The Continuing Burden of Occupational Licensing in the United States," Economic Affairs, Wiley Blackwell, vol. 38(3), pages 380-405, October.
    11. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2020. "Occupational licensing and the gender wage gap," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    12. Mengjie Lyu & Tingting Zhang & Hua Ye, 2023. "Labour market impacts of occupational licensing and delicensing: New evidence from China," British Journal of Industrial Relations, London School of Economics, vol. 61(4), pages 895-921, December.
    13. Benjamin Austin & Edward Glaeser & Lawrence Summers, 2018. "Jobs for the Heartland: Place-Based Policies in 21st-Century America," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 151-255.
    14. Ortega, Francesc & Hsin, Amy, 2022. "Occupational barriers and the productivity penalty from lack of legal status," Labour Economics, Elsevier, vol. 76(C).
    15. Dodini, Samuel, 2023. "The spillover effects of labor regulations on the structure of earnings and employment: Evidence from occupational licensing," Journal of Public Economics, Elsevier, vol. 225(C).
    16. 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.
    17. Omar Bamieh & Andrea Cintolesi & Mario Pagliero, 2024. "Estimating the returns to occupational licensing: evidence from regression discontinuities at the bar exam," Temi di discussione (Economic working papers) 1440, Bank of Italy, Economic Research and International Relations Area.
    18. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    19. M. Antonella Mancino & Leonardo Fabio Morales & Diego F. Salazar, 2023. "Signaling Worker Quality in a Developing Country: Lessons from a Certification Program," Borradores de Economia 1259, Banco de la Republica de Colombia.
    20. Hew Dalrymple (pseud.?), 2018. "Information for the Hair Dressers in Edinburgh; Against the Incorporation of Barbers—The Second Edition," Econ Journal Watch, Econ Journal Watch, vol. 15(3), pages 382–396-3, September.
    21. 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.
    22. Baird Matthew D. & Zaber Melanie A. & Bozick Robert, 2022. "Beyond traditional academic degrees: The labor market returns to occupational credentials in the United States," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-38, January.

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