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Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector

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  • Philipp Lergetporer
  • Jens Ruhose
  • Lisa Simon

Abstract

We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.

Suggested Citation

  • Philipp Lergetporer & Jens Ruhose & Lisa Simon, 2018. "Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector," CESifo Working Paper Series 7274, CESifo.
    • Handle: RePEc:ces:ceswps:_7274
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    5. Kaja Fredriksen, 2020. "Does occupational licensing impact incomes? A replication study for the German crafts case," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-17, December.
    6. Bizer, Kilian & Haverkamp, Katarzyna & Proeger, Till, 2019. "Stellungnahme zur Wiedereinführung der Meisterpflicht im Handwerk," Göttinger Beiträge zur Handwerksforschung 31, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).

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    More about this item

    Keywords

    deregulation; entry barriers; self-employment; labor market outcomes; entropy balancing; matched difference-in-differences;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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