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Quality and selection in regulated professions

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  • Basso, Gaetano
  • Brandimarti, Eleonora
  • Pellizzari, Michele
  • Pica, Giovanni

Abstract

Entry in many occupations is regulated with the objective to screen out the least able producers and guarantee high quality of output. Unfortunately, the available empirical evidence suggests that in most cases these objectives are not achieved. In this paper we investigate entry into the legal profession in Italy and we document that such a failure is due to the combination of the incomplete anonymity of the entry exam and the intergenerational transmission of business opportunities. We use microdata covering the universe of law school graduates from 2007 to 2013 matched with their careers and earnings up to 5 years after graduation. Variation generated by the random assignment of the entry exam grading commissions allows us to identify the role of family ties in the selection process. We find that connected candidates, i.e. those with relatives already active in the profession, are more likely to pass the exam and eventually earn more, especially those who performed poorly in law school. When we simulate the process of occupational choice assuming family connections did not matter, we find that strong positive selection on ability would emerge.

Suggested Citation

  • Basso, Gaetano & Brandimarti, Eleonora & Pellizzari, Michele & Pica, Giovanni, 2021. "Quality and selection in regulated professions," CEPR Discussion Papers 15674, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:15674
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    More about this item

    Keywords

    intergenerational mobility; licensing; occupational regulation;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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