Abstract
We assess the welfare consequences of occupational licensing for workers and consumers. We estimate a model of labour market equilibrium in which licensing restricts labour supply but also affects labour demand via worker quality and selection. On the margin of occupations licensed differently between U.S. states, we find that licensing raises wages and hours but reduces employment. We estimate an average welfare loss of 12% of occupational surplus. Workers and consumers respectively bear 70% and 30% of the incidence. Higher willingness to pay offsets 80% of higher prices for consumers, and higher wages compensate workers for 60% of the cost of mandated investment in occupation-specific human capital. Welfare effects appear more favourable in occupations in which licensing is more common.
Original language | English (US) |
---|---|
Pages (from-to) | 2481-2516 |
Number of pages | 36 |
Journal | Review of Economic Studies |
Volume | 90 |
Issue number | 5 |
DOIs | |
State | Published - Oct 1 2023 |
Bibliographical note
Publisher Copyright:© 2023 The Author(s). Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
Keywords
- Human capital
- Labour supply
- Occupational licensing
- Welfare analysis