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Analyzing the Extent and Influence of Occupational Licensing on the Labor Market

  • Kleiner, Morris M.

    ()

    (University of Minnesota)

  • Krueger, Alan B.

    ()

    (Princeton University)

This study examines the extent and influence of occupational licensing in the U.S. using a specially designed national labor force survey. Specifically, we provide new ways of measuring occupational licensing and consider what types of regulatory requirements and what level of government oversight contribute to wage gains and variability. Estimates from the survey indicated that 35 percent of employees were either licensed or certified by the government, and that 29 percent were fully licensed. Another 3 percent stated that all who worked in their job would eventually be required to be certified or licensed, bringing the total that are or eventually must be licensed or certified by government to 38 percent. We find that licensing is associated with about 18 percent higher wages, but the effect of governmental certification on pay is much smaller. Licensing by larger political jurisdictions is associated with higher wage gains relative to only local licensing. We find little association between licensing and the variance of wages, in contrast to unions. Overall, our results show that occupational licensing is an important labor market phenomenon that can be measured in labor force surveys.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5505.

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Length: 45 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5505
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  1. Maurizi, Alex, 1974. "Occupational Licensing and the Public Interest," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 399-413, Part I, M.
  2. Alan B. Krueger & Morris M. Kleiner, 2008. "The Prevalence and Effects of Occupational Licensing," Working Papers 1092, Princeton University, Department of Economics, Center for Economic Policy Studies..
  3. Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 843-62, October.
  4. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1, 07.
  5. Richard B. Freeman, 1981. "Union Wage Practices and Wage Dispersion within Establishments," NBER Working Papers 0752, National Bureau of Economic Research, Inc.
  6. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2005. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 151-184, February.
  7. Mario Pagliero, 2010. "Licensing Exam Difficulty and Entry Salaries in the US Market for Lawyers," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 726-739, December.
  8. Kleiner, Morris M & Kudrle, Robert T, 2000. "Does Regulation Affect Economic Outcomes? The Case of Dentistry," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 547-82, October.
  9. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
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