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The Effect of State Licensing Regulations on the Real Estate Brokerage Industry

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  • Linda L. Johnson
  • Christine Loucks

Abstract

An argument is often made that occupational licensure protects members of the regulated industry by limiting supply and raising earnings. The purpose of this study is to examine entry barriers within the real estate brokerage industry and to determine the effect of differing state entry requirements on the supply of practitioners, earnings, and quality of service provided. A simultaneous system of equations is developed where the number of licensees per capita, earnings, and quality are jointly estimated. Two‐stage least squares results support the premise that the consumer rather than the industry benefits from real estate prelicensing regulation with a higher quality of service. Significant evidence is not found to support the idea that the real estate industry regulations are self‐serving.

Suggested Citation

  • Linda L. Johnson & Christine Loucks, 1986. "The Effect of State Licensing Regulations on the Real Estate Brokerage Industry," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(4), pages 567-582, December.
    • Handle: RePEc:bla:reesec:v:14:y:1986:i:4:p:567-582
    DOI: 10.1111/1540-6229.00404
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    Cited by:

    1. Seow Eng Ong & Davin Wang & Calvin Chua, 2023. "Disruptive Innovation and Real Estate Agency: The Disruptee Strikes Back," The Journal of Real Estate Finance and Economics, Springer, vol. 67(2), pages 287-317, August.
    2. Randy I. Anderson & Robert Fok & Leonard V. Zumpano & Harold W. Elder, 1998. "Measuring the Efficiency of Residential Real Estate Brokerage Firms," Journal of Real Estate Research, American Real Estate Society, vol. 16(2), pages 139-158.
    3. Chung, Bobby W., 2022. "The costs and potential benefits of occupational licensing: A case of real estate license reform," Labour Economics, Elsevier, vol. 76(C).
    4. Funmilayo Moyinola Araloyin & OJO Olatoye, 2011. "Factors Affecting the Provision of Quality Service in Real Estate Agency in Lagos Metropolis, Nigeria," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 2(1), pages 71-79, February.
    5. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "Real Estate Brokerage and the Hosting Market: An Annotated Bibliography," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 217-278.
    6. Kyle Rozema, 2021. "Does the Bar Exam Protect the Public?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 18(4), pages 801-848, December.
    7. James R. Webb, 2000. "An Inquiry into the Professional Self Image of Real Estate Agents," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 153-177.
    8. Gene A. Marsh & Leonard V. Zumpano, 1988. "Agency Theory and the Changing Role of the Real Estate Broker: Conflicts and Possible Solutions," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 151-164.
    9. John D. Benjamin & G. Donald Jud & G. Stacy Sirmans, 2000. "What Do We Know About Real Estate Brokerage?," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 5-30.
    10. Karl L. Guntermann & Richard L. Smith, 1988. "Licensing Requirements, Enforcement Effort and Complaints Against Real Estate Agents," Journal of Real Estate Research, American Real Estate Society, vol. 3(2), pages 11-20.
    11. 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.
    12. Tim R. Sass, 2015. "Licensure and Worker Quality: A Comparison of Alternative Routes to Teaching," Journal of Law and Economics, University of Chicago Press, vol. 58(1), pages 1-35.
    13. Dirk Yandell, 2011. "Efficiency in the California Real Estate Labor Market," American Journal of Economics and Business Administration, Science Publications, vol. 3(4), pages 589-595, December.
    14. 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.
    15. Randy I. Anderson & James R. Webb, 2000. "The Education of Real Estate Salespeople and the Value of the Firm," Journal of Real Estate Research, American Real Estate Society, vol. 20(1), pages 143-152.
    16. E. Frank Stephenson & Erin E. Wendt, 2009. "Occupational Licensing: Scant Treatment in Labor Texts," Econ Journal Watch, Econ Journal Watch, vol. 6(2), pages 181-194, May.
    17. Jonathan Wiley & Justin Benefield & Marcus Allen, 2014. "Cyclical Determinants of Brokerage Commission Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 196-219, January.
    18. David Barker, 2008. "Ethics and Lobbying: The Case of Real Estate Brokerage," Journal of Business Ethics, Springer, vol. 80(1), pages 23-35, June.

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