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Does regulation trade-off quality against inequality? The case of German architects and construction engineers

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  • Rostam-Afschar, Davud
  • Strohmaier, Kristina

Abstract

We exploit an exogenous price increase by about 10% for architectural services to answer the question how price regulation affects income inequality and service quality. Using individual-level data from the German microcensus for the years 2006 to 2012, we find a significant reform effect of 8% on personal net income for self-employed architects and construction engineers. This group moved from the second lowest to the highest quintile of the net income distribution. This increase in inequality is associated with a deterioration of service quality. The reform reduced average scores of a peer ranking for architects by 18%.

Suggested Citation

  • Rostam-Afschar, Davud & Strohmaier, Kristina, 2018. "Does regulation trade-off quality against inequality? The case of German architects and construction engineers," Hohenheim Discussion Papers in Business, Economics and Social Sciences 23-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
  • Handle: RePEc:zbw:hohdps:232018
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    References listed on IDEAS

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    1. Davud Rostam-Afschar, 2014. "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship," Empirical Economics, Springer, vol. 47(3), pages 1067-1101, November.
    2. Robin Jessen & Davud Rostam-Afschar & Sebastian Schmitz, 2018. "How important is precautionary labour supply?," Oxford Economic Papers, Oxford University Press, vol. 70(3), pages 868-891.
    3. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    4. Maria Koumenta & Mario Pagliero, 2017. "Occupational Licensing in the European Union: Coverage and Wage Effects," Carlo Alberto Notebooks 525, Collegio Carlo Alberto.
    5. 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.
    6. Matthew Smith & Danny Yagan & Owen Zidar & Eric Zwick, 2019. "Capitalists in the Twenty-First Century," The Quarterly Journal of Economics, Oxford University Press, vol. 134(4), pages 1675-1745.
    7. Steiner, Viktor & Fossen, Frank & Rees, Ray & Rostam-Afschar, Davud, 2017. "How Do Entrepreneurial Portfolios Respond to Income Taxation?," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168302, Verein für Socialpolitik / German Economic Association.
    8. Milton Friedman & Simon Kuznets, 1945. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
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    Cited by:

    1. Giesecke, Johannes & Groß, Martin & Stuth, Stefan, 2020. "Occupational Closure and Wage Inequality: How Occupational Closure Effects Vary Between Workers [Wie berufliche Schließungseffekte zwischen Arbeitnehmergruppen variieren]," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 157-195.
    2. Mario Pagliero, 2019. "Occupational Licensing in the EU: Protecting Consumers or Limiting Competition?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 137-153, August.
    3. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2020. "Occupational licensing and the gender wage gap," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Rostam-Afschar Davud, 2020. "Inklusive Beschäftigungspolitik: Fakten, Herausforderungen und neue Ideen zur Regulierung von Berufen," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 69(2), pages 129-139, August.

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    More about this item

    Keywords

    Regulation; Inequality; Wages; Service Quality; Entrepreneurship; Natural Experiment;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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