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Job Market Signaling through Occupational Licensing

Author

Listed:
  • Peter Blair

    (Clemson University)

  • Bobby Chung

    (Clemson University)

Abstract
Among men, the black-white wage gap is as large today as it was in 1950. We test whether the black-white wage gap is due to asymmetric information using newly collected data on occupational licensing laws that ban workers with criminal records. We find evidence supporting this hypothesis. The licensing premiums for black men are largest in licensed occupations that restrict felons —particularly in states with Banthe-Box laws and at small firms. In these contexts where a worker’s criminal history is difficult to infer, we find that occupational licensing reduces asymmetric information and reduces the racial wage gap.

Suggested Citation

  • Peter Blair & Bobby Chung, 2017. "Job Market Signaling through Occupational Licensing," Working Papers 2017-50, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2017-50
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Blair_Chung_2017_licensing_gender_racial_wage_gaps.pdf
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Blair_Chung_2017_licensing_gender_racial_wage_gaps_r2.pdf
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Blair_Chung_2017_licensing_gender_racial_wage_gaps_r3.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    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. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2020. "Occupational Licensing and the Gender Wage Gap," GLO Discussion Paper Series 689, Global Labor Organization (GLO).
    3. Vanessa Brown & Gardner Carrick & Maggie R. Jones & Nikolas Pharris-Ciurej & John Voorheis & Caroline Walker, 2022. "The impact of manufacturing credentials on earnings and the probability of employment," Working Papers 22-15, Center for Economic Studies, U.S. Census Bureau.
    4. Peter Q. Blair & Bobby W. Chung, 2018. "How Much of Barrier to Entry is Occupational Licensing?," NBER Working Papers 25262, National Bureau of Economic Research, Inc.
    5. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2022. "Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes," Labour Economics, Elsevier, vol. 79(C).
    6. Bobby Chung & Jian Zou, 2021. "Teacher Licensing, Teacher Supply, and Student Achievement: Nationwide Implementation of edTPA," Working Papers 2021-039, Human Capital and Economic Opportunity Working Group.
    7. Peter Q. Blair & Bobby W. Chung, 2019. "How Much of Barrier to Entry is Occupational Licensing?," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 919-943, December.
    8. Ashley C. Craig, 2023. "Optimal Income Taxation with Spillovers from Employer Learning," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 82-125, May.
    9. Jeounghee Kim, 2020. "Occupational Credentials and Job Qualities of Direct Care Workers: Implications for Labor Shortages," Journal of Labor Research, Springer, vol. 41(4), pages 403-420, December.
    10. 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.
    11. Peter Q. Blair & Bobby W. Chung, 2021. "Informed Choices: A Model of Occupational Licensing and Statistical Discrimination," Upjohn Working Papers 21-351, W.E. Upjohn Institute for Employment Research.
    12. Xia, Xing, 2021. "Barrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants," Labour Economics, Elsevier, vol. 71(C).
    13. 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.
    14. Boyd-Swan, Casey & Herbst, Chris M., 2017. "Racial and Ethnic Discrimination in the Labor Market for Child Care Teachers," IZA Discussion Papers 11140, Institute of Labor Economics (IZA).
    15. Kim Jeounghee & Chatterji Sangeeta, 2020. "Gender and Educational Variations in the Earnings Premiums of Occupational Credentials," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-21, July.

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    More about this item

    Keywords

    wage inequality; tatistical discrimination; screening; signaling; asymmetric information;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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