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Barrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants

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  • Xia, Xing

Abstract

Economic theory suggests that occupational licensing can be a barrier to entry that restricts labor supply (Friedman, 1962; Stigler, 1971) or a signal of quality that enhances the labor market (Leland, 1979). This paper studies two types of licenses for dental assistants (DAs) in the U.S. to illustrate the competing supply-restricting and quality-signaling effects of licensing on minority workers. Specifically, I study the effects of introducing the X-ray permit, a state-issued license to perform X-ray procedures that also carries information about a DA’ s competence, against that of the entry-level license, which provides little information about a DA’ s competence. I find that the X-ray permit requirement reduces the wage gap between non-Hispanic white and minority DAs by 8 percent, presumably because it helps minority DAs secure jobs that entail X-ray procedures. In contrast, entry-level licensing does not reduce the racial wage gap. These findings suggest that licensing alleviates statistical discrimination if it reveals information about the holder’ s productivity.

Suggested Citation

  • 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).
  • Handle: RePEc:eee:labeco:v:71:y:2021:i:c:s0927537121000622
    DOI: 10.1016/j.labeco.2021.102027
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    More about this item

    Keywords

    Occupational licensing; Statistical discrimination; Wage inequality; Scope of practice;
    All these keywords.

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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