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Occupational Licensing in the European Union: Coverage and Wage Effects

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  • Koumenta, Maria
  • Pagliero, Mario

Abstract

We present the first EU-wide study on the prevalence and labour market impact of occupational regulation in the EU. Drawing on a new EU Survey of Regulated Occupations, we find that licensing affects about 22 percent of workers in the EU, although there is significant variability across member states and occupations. On average, licensing is associated with a 4 percent higher hourly wages. Using decomposition techniques we show that rent capture accounts for one third of this effect and the remaining is attributed to signalling. We find considerable heterogeneity in the wage gains by occupation and level of educational attainment. Finally, occupational licensing increases wage inequality. After accounting for composition effects, licensing increases the standard deviation of wages by about 0.02 log points.

Suggested Citation

  • Koumenta, Maria & Pagliero, Mario, 2018. "Occupational Licensing in the European Union: Coverage and Wage Effects," CEPR Discussion Papers 12577, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12577
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    References listed on IDEAS

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    1. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    2. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
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    4. 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 173-202.
    5. Edward J. Timmons & Robert J. Thornton, 2010. "The Licensing of Barbers in the USA," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 740-757, December.
    6. Pagliero, Mario, 2013. "The impact of potential labor supply on licensing exam difficulty," Labour Economics, Elsevier, vol. 25(C), pages 141-152.
    7. Pagliero, Mario, 2011. "What is the objective of professional licensing? Evidence from the US market for lawyers," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 473-483, July.
    8. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc.
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    Cited by:

    1. 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.

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    More about this item

    Keywords

    licensing; occupational regulation;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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