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Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector

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  • Lergetporer, Philipp

    () (Ifo Institute for Economic Research)

  • Ruhose, Jens

    () (Leibniz University of Hannover)

  • Simon, Lisa

    () (CESifo)

Abstract

We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.

Suggested Citation

  • Lergetporer, Philipp & Ruhose, Jens & Simon, Lisa, 2018. "Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector," IZA Discussion Papers 11857, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11857
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    More about this item

    Keywords

    deregulation; entry barriers; self-employment; labor market outcomes; entropy balancing; matched difference-in-differences;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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