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Analyzing the Extent and Influence of Occupational Licensing on the Labor Market

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Author Info

  • Kleiner, Morris M.

    ()
    (University of Minnesota)

  • Krueger, Alan B.

    ()
    (Princeton University)

Abstract

This study examines the extent and influence of occupational licensing in the U.S. using a specially designed national labor force survey. Specifically, we provide new ways of measuring occupational licensing and consider what types of regulatory requirements and what level of government oversight contribute to wage gains and variability. Estimates from the survey indicated that 35 percent of employees were either licensed or certified by the government, and that 29 percent were fully licensed. Another 3 percent stated that all who worked in their job would eventually be required to be certified or licensed, bringing the total that are or eventually must be licensed or certified by government to 38 percent. We find that licensing is associated with about 18 percent higher wages, but the effect of governmental certification on pay is much smaller. Licensing by larger political jurisdictions is associated with higher wage gains relative to only local licensing. We find little association between licensing and the variance of wages, in contrast to unions. Overall, our results show that occupational licensing is an important labor market phenomenon that can be measured in labor force surveys.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5505.

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Length: 45 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5505

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Related research

Keywords: occupational licensing; labor market institutions; labor market data; wages and labor market institutions; wage inequality and labor market institutions;

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References

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  1. Richard B. Freeman, 1982. "Union wage practices and wage dispersion within establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 36(1), pages 3-21, October.
  2. 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.
  3. Mario Pagliero, 2010. "Licensing Exam Difficulty and Entry Salaries in the US Market for Lawyers," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 726-739, December.
  4. 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.
  5. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  6. Kleiner, Morris M & Kudrle, Robert T, 2000. "Does Regulation Affect Economic Outcomes? The Case of Dentistry," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 547-82, October.
  7. Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 843-62, October.
  8. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc.
  9. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, October.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Social-Democratic Feudalism and Its Upper Paleolithic Impetus
    by Daniel B. Klein in cato unbound on 2010-12-20 19:58:27
  2. Occupational licensing: NZ Edition
    by Eric Crampton in Offsetting Behaviour on 2014-04-08 19:00:00
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Cited by:
  1. Mario Pagliero, 2007. "The Impact of Potential Labor Supply on Licensing Exam Difficulty," Carlo Alberto Notebooks 53, Collegio Carlo Alberto, revised 2013.
  2. Cecilia Elena Rouse, 2013. "Comment on "A Pollution Theory of Discrimination: Male and Female Differences in Occupations and Earnings"," NBER Chapters, in: Human Capital in History: The American Record National Bureau of Economic Research, Inc.
  3. Morris M. Kleiner & Charles Wheelan, 2010. "Occupational Licensing Matters: Wages, Quality and Social Costs," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 29-33, October.

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