[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fip/fedmsr/88385.html
   My bibliography  Save this paper

Occupational Licensing and Labor Market Fluidity

Author

Listed:
Abstract
We show that occupational licensing has significant negative effects on labor market fluidity defined as cross-occupation mobility. Using a balanced panel of workers constructed from the CPS and SIPP data, we analyze the link between occupational licensing and labor market outcomes. We find that workers with a government-issued occupational license experience churn rates significantly lower than those of non-licensed workers. Specifically, licensed workers are 24% less likely to switch occupations and 3% less likely to become unemployed in the following year. Moreover, occupational licensing represents barriers to entry for both non-employed workers and employed ones. The effect is more prominent for employed workers relative to those entering from non-employment, because the opportunity cost of acquiring a license is much higher for employed individuals. Lastly, we find that average wage growth is higher for licensed workers than non-licensed workers, whether they stay in the same occupation in the next year or switch occupations. We find significant heterogeneity in the licensing effect across different occupation groups. These results hold across various data sources, time spans, and indicators of being licensed. Overall, licensing could account for almost 8% of the total decline in monthly occupational mobility over the past two decades

Suggested Citation

  • Morris M. Kleiner & Ming Xu, 2020. "Occupational Licensing and Labor Market Fluidity," Staff Report 606, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:88385
    DOI: 10.21034/sr.606
    as

    Download full text from publisher

    File URL: https://www.minneapolisfed.org/research/sr/sr606.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.21034/sr.606?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. 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.
    3. Jeremy Lise & Jean-Marc Robin, 2017. "The Macrodynamics of Sorting between Workers and Firms," American Economic Review, American Economic Association, vol. 107(4), pages 1104-1135, April.
    4. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    5. Raj Chetty, 2009. "Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 451-488, May.
    6. Janna E. Johnson & Morris M. Kleiner, 2017. "Is Occupational Licensing a Barrier to Interstate Migration?," NBER Working Papers 24107, National Bureau of Economic Research, Inc.
    7. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
    8. Matthew Blackwell & Stefano Iacus & Gary King & Giuseppe Porro, 2009. "cem: Coarsened exact matching in Stata," Stata Journal, StataCorp LP, vol. 9(4), pages 524-546, December.
    9. Sharon Traiberman, 2019. "Occupations and Import Competition: Evidence from Denmark," American Economic Review, American Economic Association, vol. 109(12), pages 4260-4301, December.
    10. Morris M. Kleiner & Alan B. Krueger, 2013. "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 173-202.
    11. Suyoun Han & Morris M. Kleiner, 2016. "Analyzing the Influence of Occupational Licensing Duration and Grandfathering on Labor Market Outcomes," NBER Working Papers 22810, National Bureau of Economic Research, Inc.
    12. repec:iza:izawol:journl:y:2015:p:175 is not listed on IDEAS
    13. Maury Gittleman & Mark A. Klee & Morris M. Kleiner, 2018. "Analyzing the Labor Market Outcomes of Occupational Licensing," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 57-100, January.
    14. repec:hal:spmain:info:hdl:2441/2gm7u1h28o97arriihp43sr90l is not listed on IDEAS
    15. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    16. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    17. Iacus, Stefano & King, Gary & Porro, Giuseppe, 2009. "cem: Software for Coarsened Exact Matching," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 30(i09).
    18. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    19. Henry R. Hyatt, 2015. "The decline in job-to-job flows," IZA World of Labor, Institute of Labor Economics (IZA), pages 175-175, July.
    20. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.
    21. Robinson, Chris, 1989. "The Joint Determination of Union Status and Union Wage Effects: Some Tests of Alternative Models," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 639-667, June.
    22. Iacus, Stefano M. & King, Gary & Porro, Giuseppe, 2012. "Causal Inference without Balance Checking: Coarsened Exact Matching," Political Analysis, Cambridge University Press, vol. 20(1), pages 1-24, January.
    23. Janna Johnson & Morris M. Kleiner, 2017. "Is Occupational Licensing a Barrier to Interstate Migration?," Staff Report 561, Federal Reserve Bank of Minneapolis.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dodini, Samuel, 2023. "The spillover effects of labor regulations on the structure of earnings and employment: Evidence from occupational licensing," Journal of Public Economics, Elsevier, vol. 225(C).
    2. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    3. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2020. "COVID-19 Is Also a Reallocation Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(2 (Summer), pages 329-383.
    4. Christenko, Aleksandr, 2022. "Automation and occupational mobility: A task and knowledge-based approach," Technology in Society, Elsevier, vol. 70(C).
    5. Mengjie Lyu & Tingting Zhang & Hua Ye, 2023. "Labour market impacts of occupational licensing and delicensing: New evidence from China," British Journal of Industrial Relations, London School of Economics, vol. 61(4), pages 895-921, December.
    6. Suyoun Han & Morris M. Kleiner, 2021. "Analyzing the Influence of Occupational Licensing Duration and Grandfathering on Wage Determination," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(2), pages 147-187, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Alex Bryson & Morris M. Kleiner, 2019. "Re‐Examining Advances in Occupational Licensing Research: Issues and Policy Implications," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 721-731, December.
    3. Morris M. Kleiner & Wenchen Wang, 2023. "The Labor Market Effects of Occupational Licensing in the Public Sector," Staff Report 645, Federal Reserve Bank of Minneapolis.
    4. Morris M. Kleiner & Evan J. Soltas, 2019. "A Welfare Analysis of Occupational Licensing in U.S. States," NBER Working Papers 26383, National Bureau of Economic Research, Inc.
    5. 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.
    6. Alicia Plemmons, 2022. "Occupational licensing's effects on firm location and employment in the United States," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 735-760, December.
    7. Maria Koumenta & Mario Pagliero, 2019. "Occupational Regulation in the European Union: Coverage and Wage Effects," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 818-849, December.
    8. Niron Hashai & Sarit Markovich, 2017. "Market Entry by High Technology Startups: The Effect of Competition Level and Startup Innovativeness," Strategy Science, INFORMS, vol. 2(3), pages 141-160, September.
    9. Mocetti, Sauro & Rizzica, Lucia & Roma, Giacomo, 2021. "Regulated occupations in Italy: Extent and labour market effects," International Review of Law and Economics, Elsevier, vol. 66(C).
    10. Tingting Zhang & Morley Gunderson, 2020. "Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018," Journal of Labor Research, Springer, vol. 41(4), pages 338-351, December.
    11. Mengjie Lyu & Tingting Zhang & Hua Ye, 2023. "Labour market impacts of occupational licensing and delicensing: New evidence from China," British Journal of Industrial Relations, London School of Economics, vol. 61(4), pages 895-921, December.
    12. Suyoun Han & Morris M. Kleiner, 2021. "Analyzing the Influence of Occupational Licensing Duration and Grandfathering on Wage Determination," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(2), pages 147-187, April.
    13. Shi, Wei & King, David R. & Connelly, Brian L., 2021. "Closing the deal: Managerial response to short sellers following M&A announcement," Journal of Business Research, Elsevier, vol. 130(C), pages 188-199.
    14. Joseph, George & Hoo, Yi Rong & Moqueet, Nazia Sultana & Chellaraj, Gnanaraj, 2023. "Early-life exposure to unimproved sanitation and delayed school enrollment: Evidence from Bangladesh," World Development Perspectives, Elsevier, vol. 32(C).
    15. Omar Bamieh & Andrea Cintolesi & Mario Pagliero, 2024. "Estimating the returns to occupational licensing: evidence from regression discontinuities at the bar exam," Temi di discussione (Economic working papers) 1440, Bank of Italy, Economic Research and International Relations Area.
    16. Baird Matthew D. & Bozick Robert & Zaber Melanie A., 2022. "Beyond traditional academic degrees: The labor market returns to occupational credentials in the United States," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-38, January.
    17. Peter Younkin & Venkat Kuppuswamy, 2018. "The Colorblind Crowd? Founder Race and Performance in Crowdfunding," Management Science, INFORMS, vol. 64(7), pages 3269-3287, July.
    18. Yungu Kang & David H. Zhu & Yan Anthea Zhang, 2021. "Being extraordinary: How CEOS' uncommon names explain strategic distinctiveness," Strategic Management Journal, Wiley Blackwell, vol. 42(2), pages 462-488, February.
    19. Blázquez, Maite & Herrarte, Ainhoa & Moro-Egido, Ana I., 2024. "Has the COVID-19 pandemic widened the gender gap in paid work hours in Spain?," Journal of Demographic Economics, Cambridge University Press, vol. 90(2), pages 313-348, June.
    20. Gambacorta, Leonardo & Cornelli, Giulio & Doerr, Sebastian & Merrouche, Ouarda, 2020. "Inside the Regulatory Sandbox: Effects on Fintech Funding," CEPR Discussion Papers 15502, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Occupational licensing; Regulation; Labor markets;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • K0 - Law and Economics - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:88385. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.