IDEAS home Printed from https://ideas.repec.org/p/zbw/ifhwps/112018.html
   My bibliography  Save this paper

Does occupational licensing impact incomes? - The German crafts case

Author

Listed:
  • Fredriksen, Kaja

Abstract

The empirical literature on occupational licensing finds standard monopoly effects of entry regulations: Less competition and economic rents for professionals. I exploit the natural experimental design of a change in the German crafts regulation in 2004, which removed the traditional licensing requirement only for certain trades, and find no robust effects. I point out that existing studies on the income effects of occupational licensing suffer from methodological weaknesses. Most studies rely on cross-section estimates that are likely to be biased due to unobserved heterogeneity whereas others do not rigorously define the population of interest. Based on my results, I suggest that demand-effects and market saturation have so far been inadequately discussed in the literature.

Suggested Citation

  • Fredriksen, Kaja, 2018. "Does occupational licensing impact incomes? - The German crafts case," ifh Working Papers 11 (2018), Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh), revised 2018.
    • Handle: RePEc:zbw:ifhwps:112018
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/191853/1/ifh-wp-11-2017-update.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milton Friedman & Simon Kuznets, 1945. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, March.
    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. Morris M. Kleiner, 2000. "Occupational Licensing," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 189-202, Fall.
    4. 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 547-582, October.
    5. Davud Rostam-Afschar, 2014. "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship," Empirical Economics, Springer, vol. 47(3), pages 1067-1101, November.
    6. Peter Hoeller & Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 1. Mapping Income Inequality Across the OECD," OECD Economics Department Working Papers 924, OECD Publishing.
    7. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
    8. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    9. Milton Friedman & Simon Kuznets, 1954. "The Data on Income from Independent Professional Practice," NBER Chapters, in: Income from Independent Professional Practice, pages 46-62, National Bureau of Economic Research, Inc.
    10. Peter Hoeller, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 4. Top Incomes," OECD Economics Department Working Papers 927, OECD Publishing.
    11. 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.
    12. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    13. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    14. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    15. James D. Shilling & C. F. Sirmans, 1988. "The Effects of Occupational Licensing on Complaints Against Real Estate Agents," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 1-9.
    16. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-1061, October.
    17. Simon Rottenberg, 1962. "The Economics of Occupational Licensing," NBER Chapters, in: Aspects of Labor Economics, pages 3-20, National Bureau of Economic Research, Inc.
    18. Mauro Pisu, 2012. "Less Income Inequality and More Growth – Are they Compatible? Part 5. Poverty in OECD Countries," OECD Economics Department Working Papers 928, OECD Publishing.
    19. Fama, Eugene F & Laffer, Arthur B, 1972. "The Number of Firms and Competition," American Economic Review, American Economic Association, vol. 62(4), pages 670-674, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lukesch, Veronika & Zwick, Thomas, 2021. "Outside options drive wage inequalities in continuing jobs: Evidence from a natural experiment," ZEW Discussion Papers 21-003, ZEW - Leibniz Centre for European Economic Research.
    2. 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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2022. "Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes," Labour Economics, Elsevier, vol. 79(C).
    3. Davud Rostam‐Afschar & Kristina Strohmaier, 2019. "Does Regulation Trade Off Quality against Inequality? The Case of German Architects and Construction Engineers," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 870-893, December.
    4. Morikawa, Masayuki, 2018. "Occupational licenses and labor market outcomes in Japan," Japan and the World Economy, Elsevier, vol. 48(C), pages 45-56.
    5. 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.
    6. Pagliero, Mario, 2013. "The impact of potential labor supply on licensing exam difficulty," Labour Economics, Elsevier, vol. 25(C), pages 141-152.
    7. Lex, Christoph & Tennyson, Sharon, 2021. "EU intermediary regulation and its impact on insurance agent quality: Evidence from Germany," International Review of Law and Economics, Elsevier, vol. 68(C).
    8. Wei Chi & Morris M. Kleiner & Xiaoye Qian, 2017. "Do Occupational Regulations Increase Earnings? Evidence from China," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(2), pages 351-381, April.
    9. Sauro Mocetti & Giacomo Roma & Enrico Rubolino, 2022. "Knocking on Parents’ Doors: Regulation and Intergenerational Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 57(2), pages 525-554.
    10. John M. Barrios, 2022. "Occupational Licensing and Accountant Quality: Evidence from the 150‐Hour Rule," Journal of Accounting Research, Wiley Blackwell, vol. 60(1), pages 3-43, March.
    11. Mario Pagliero, 2007. "The Impact of Potential Labor Supply on Licensing Exam Difficulty in the US Market for Lawyers," CHILD Working Papers wp19_08, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    12. Wing, Coady & Marier, Allison, 2014. "Effects of occupational regulations on the cost of dental services: Evidence from dental insurance claims," Journal of Health Economics, Elsevier, vol. 34(C), pages 131-143.
    13. Xia, Xing, 2021. "Barrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants," Labour Economics, Elsevier, vol. 71(C).
    14. Pagliero, Mario, 2018. "Occupational Licensing, Labor Mobility, and the Unfairness of Entry Standards," CEPR Discussion Papers 13076, C.E.P.R. Discussion Papers.
    15. J. Mark Ramseyer & Eric Rasmusen, 2013. "Lowering the Bar to Raise the Bar: Licensing Difficulty and Attorney Quality in Japan," Working Papers 2013-12, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    16. Adriana D. Kugler & Robert M. Sauer, 2005. "Doctors without Borders? Relicensing Requirements and Negative Selection in the Market for Physicians," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 437-466, July.
    17. Bruno Deffains & Dominique Demougin, 2023. "Capitation taxes and the regulation of professional services," European Journal of Law and Economics, Springer, vol. 55(2), pages 167-193, April.
    18. Dick M. Carpenter II & Lisa Knepper & Angela C. Erickson & John K. Ross, 2015. "Regulating Work: Measuring the Scope and Burden of Occupational Licensure Among Low- and Moderate-Income Occupations in the United States," Economic Affairs, Wiley Blackwell, vol. 35(1), pages 3-20, February.
    19. Mocetti, Sauro & Rizzica, Lucia & Roma, Giacomo, 2021. "Regulated occupations in Italy: Extent and labour market effects," International Review of Law and Economics, Elsevier, vol. 66(C).
    20. Mario Pagliero & Edward Timmons, 2013. "Occupational Regulation in the European Legal Market," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(2), pages 243-265, August.

    More about this item

    Keywords

    Labor markets; occupational licensing; monopoly rent; natural experiment; craftsmanship;
    All these keywords.

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifhwps:112018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ifgoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.