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Consumer Protection in an Online World: An Analysis of Occupational Licensing

Author

Listed:
  • Chiara Farronato
  • Andrey Fradkin
  • Bradley Larsen
  • Erik Brynjolfsson

Abstract

We study the effects of occupational licensing on consumer choices and market outcomes in a large online platform for residential home services. We exploit exogenous variation in the time at which licenses are displayed on the platform to identify the causal effects of licensing information on consumer choices. We find that the platform-verified licensing status of a professional is unimportant for consumer decisions relative to review ratings and prices. We confirm this result in an independent consumer survey. We also use variation in regulation stringency across states and occupations to measure the effects of licensing on aggregate market outcomes on the platform. Our results show that more stringent licensing regulations are associated with less competition and higher prices but not with any improvement in customer satisfaction as measured by review ratings or the propensity to use the platform again.

Suggested Citation

  • Chiara Farronato & Andrey Fradkin & Bradley Larsen & Erik Brynjolfsson, 2020. "Consumer Protection in an Online World: An Analysis of Occupational Licensing," NBER Working Papers 26601, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26601
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    Cited by:

    1. Benson, Alan & Sojourner, Aaron J. & Umyarov, Akhmed, 2015. "Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market," IZA Discussion Papers 9501, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • K2 - Law and Economics - - Regulation and Business Law
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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