Occupational licensing

Abstract: I analyse occupational licensing as an input regulation that requires minimum levels of human capital investment by professionals. By raising professionals' training levels, licensing helps alleviate moral hazard problems associated with the provision of high quality services. I also consider certification, whereby consumers are provided information about professionals' training levels. I show that licensing and certification tend to benefit consumers who value quality highly at the expense of those who do not. Licensing may raise total surplus if sellers' investments are not observable, but is Pareto-worsening if training levels are observable. Certification may, however, lead to excessive investment as a signalling device, and thus be Pareto Inferior to either licensing or to a policy of laissez-faire.

Abstract: Kleiner evaluates the effects of occupational licensing on the cost and quality of services provided.

Abstract: Our study provides the first national analysis of the labour market implications of workers who are licensed by any agency of the government in the USA. Using a specially designed Gallup survey of a nationally representative sample of Americans, we provide an analysis of the influence of this form of occupational regulation. We find that 29 per cent of the workforce is required to hold a licence, which is a higher percentage than that found in other studies that rely on state-level occupational licensing data or single states. Workers who have higher levels of education are more likely to work in jobs that require a licence. Union workers and government employees are more likely to have a licence requirement than are non-union or private sector employees. Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions — that is about 15 per cent — and that being both licensed and in a union can increase wages by more than 24 per cent. However, unlike unions which reduce variance in wages, licensing does not significantly reduce wage dispersion for individuals in licensed jobs.

Abstract: This study examines the role of variations in occupational licensing policies in improving the quality of services provided to consumers and the effect of restrictive regulations on the prices of certain services and on the earnings of practitioners. Theory suggests that more restrictive licensing may raise prices and at the same time raise demand by reducing uncertainty about the quality of the services. This article uses unique data on the dental health of incoming Air Force personnel to analyze empirically the effects of varying licensing stringency among the states. It finds that tougher licensing does not improve outcomes, but it does raise prices for consumers and the earnings of practitioners. These results cast doubt on the principal public interest argument in favor of more stringent state licensing practices.