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

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  • Morris M. Kleiner
  • Alan B. Krueger

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 14 percent higher wages, but the effect of governmental certification on pay is much smaller. Licensing by multiple political jurisdictions is associated with the highest wage gains relative to only local licensing. Specific requirements by the government for a worker to enter an occupation, such as education level and long internships, are positively associated with wages. 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14979.

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Date of creation: May 2009
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Publication status: published as 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 S173 - S202.
Handle: RePEc:nbr:nberwo:14979

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  1. Maurizi, Alex, 1974. "Occupational Licensing and the Public Interest," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(2), pages 399-413, Part I, M.
  2. Kleiner, Morris M. & Krueger, Alan B., 2008. "The Prevalence and Effects of Occupational Licensing," IZA Discussion Papers 3675, Institute for the Study of Labor (IZA).
  3. 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.
  4. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 957-79, July.
  5. 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.
  6. Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 53(5), pages 843-62, October.
  7. 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.
  8. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, January.
  9. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(1), pages 151-184, February.
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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. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.
  2. Robert I. Lerman, 2012. "Can the United States Expand Apprenticeship? Lessons from Experience," Working Papers, American University, Department of Economics 2012-18, American University, Department of Economics.
  3. Pagliero, Mario, 2013. "The impact of potential labor supply on licensing exam difficulty," Labour Economics, Elsevier, vol. 25(C), pages 141-152.
  4. 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.
  5. Christina DePasquale and Kevin Stange, 2014. "State Regulation and the Mobility of Nurses: An Examination of the Nurse Licensure Compact," Emory Economics, Department of Economics, Emory University (Atlanta) 1414, Department of Economics, Emory University (Atlanta).
  6. Uwe E. Reinhardt, 2014. "Does Occupational Licensing Deserve Our Approval? A Review of Work by Morris Kleiner," Econ Journal Watch, Econ Journal Watch, vol. 11(3), pages 318-325, September.
  7. Park, Jee-Hyeong & Spurr, Stephen J. & Chang, Sheng-Kai, 2009. "A Model of Hierarchical Professionals: Cooperation and Conflict between Anesthesiologists and CRNAs," CEI Working Paper Series, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University 2009-13, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  8. 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, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 29-33, October.
  9. David Marsden, 2010. "The End of National Models in Employment Relations?," CEP Discussion Papers dp0998, Centre for Economic Performance, LSE.
  10. Lerman, Robert I., 2012. "Can the United States Expand Apprenticeship? Lessons from Experience," IZA Policy Papers 46, Institute for the Study of Labor (IZA).
  11. David Marsden, 2010. "The end of national models in employment relations?," LSE Research Online Documents on Economics 48913, London School of Economics and Political Science, LSE Library.

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