The Effects of Occupational Licensing: Evidence from Business‐Level Data

Zapletal, Marek

doi:10.1111/bjir.12434

Cited by 13 publications

(10 citation statements)

References 40 publications

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“…This study shifts the focus away from consumers and employees and toward how occupational licensing affects business decisions. Zapletal (2018) is the closest study to my own, as it focuses on the location decisions of businesses, though it focuses specifically on personal-care industries. Zapletal finds that the restrictiveness of licensure affects businesses' decisions to enter and exit but not the overall quality or prices of their cosmetology services.…”

Section: Literaturementioning

confidence: 99%

“…Previous studies have focused on the effects of occupational licensing on employees in the form of wage premiums and on consumers in the form of changes in the price and quality of goods and services, but few studies have investigated the aggregated or disaggregated effects of costs on firm decision-making. This work seeks to complement similar work by Zapletal (2018), in which he looked at the entry and exit of cosmetology, by abstracting to observe the aggregate effects on overall firm behaviour across all industries. While aggregation is necessary with firm-level data to measure the response of firm to the regulatory environment, attempts at disaggregation are also provided for specific case studies to ensure to trend is consistent when replicating an industry-focused approach.…”

Section: Introductionmentioning

confidence: 99%

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Occupational licensing's effects on firm location and employment in the United States

Plemmons

2022

Brit J Industrial Rel

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Occupational licensing is the policy in which a government body imposes minimum requirements to work within a specific job classification. These requirements include some combination of education credits, hours of experience mandatory fees and examinations. The costs to firms of paying to license employees or hire licensed employees can be a substantial consideration when they are making location and hiring decisions because the licensure requirements are often determined at the state level. Using firm-level data, I analyse how these occupational licensing expenses affect firms by determining how differences in those expenses across state borders in the United States affect the likelihood that a firm will locate in an expensive state if a substantially cheaper state is a short distance away. As the monetary cost of fees and the time investment of experience and education for each worker increases, firms are less likely to locate in high-cost states. I also use a geographic regression discontinuity design and find that the more expensive side of a state border has 2.3 fewer employees on average.

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Section: Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Occupational licensing's effects on firm location and employment in the United States

Plemmons

2022

Brit J Industrial Rel

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“…A principal function of private sector unions is to reallocate economic surplus from capital to labor, as we discussed. By contrast, an occupational licensing requirement reallocates surplus from consumers, licensure applicants, and unlicensed workers to licensed workers and training providers (Nunn 2018; Zapletal 2019; Kleiner and Soltas 2019).…”

Section: How Labor Market Institutions Affect Workersmentioning

confidence: 99%

How Labor Market Institutions Matter for Worker Compensation

Nunn¹,

Hunt²

2021

The ANNALS of the American Academy of Political and Social Scie

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Labor markets deviate substantially from the competitive ideal, and policies and institutions affect workers’ outcomes. Over the last 45 years, the dramatic increase in compensation of high earners and weak or stagnant growth for low and middle earners have shone a spotlight on the ways in which labor market institutions sometimes work to the detriment of lower-paid workers. In this article, we survey several institutions—minimum wages, private sector unions, noncompete agreements, and occupational licensing—considering how they have evolved in ways that affect workers’ outcomes, given that the labor market is characterized by uneven distribution of market gains. We describe the modern labor market as one that substantially features alternative work arrangements and labor market concentration, and we consider the implications of this for public policy. Those policies, along with the surveyed institutions, are the focus of our final section that discusses key options for improving worker outcomes.

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“…In terms of laborers, workers who are subject to an occupational license often benefit from wage premiums within many industries; however, some studies have found that these licenses have also reduced aggregate economic and geographic mobility (Timmons and Thornton, 2008; Perloff, 1980; Guis, 2016; Kleiner and Park, 2010; Kleiner and Krueger, 2010, 2013; Meehan et al , 2019). In areas and industries with these wage premiums, there is also evidence of reduction in labor supply entry (Thornton and Weintraub, 1979; Hall and Pokharel, 2016; Zapletal, 2018). These wage premiums are thought to represent the additional cost of education and training, incentivize public health and safety and increase overall quality of goods and services (Akerlof, 1970; Shapiro, 1986).…”

Section: Literature Reviewmentioning

confidence: 99%

Does occupational licensing costs disproportionately affect the self-employed?

Plemmons

2020

JEPP

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PurposeThe purpose of this study is to analyze how occupational licensing costs within a state affect the performance of self-employed firms, as measured through annual sales.Design/methodology/approachThis study utilizes an empirical approach to determine if there are additional effects on the annual sales for firms that are self-employed in high-cost states that are not explained through the individual estimations. Since the choice of self-employment is plausibly nonrandom, this study also uses a propensity score matching method to develop a matched subsample of self-employed and employee-maintaining firms. This selection methodology ensures that the set of self-employed and employee-maintaining firm observations are similar in all measurable attributes besides their regulatory environment and firm structure. Using this representative subsample, the empirical framework is repeated to reevaluate the effects of high occupational licensing fees on the sales of self-employed firms.FindingsIn both the unmatched and matched samples, there are significant, large, negative interactions representing a reduction in annual sales per employee within self-employed firms relative to employee-maintaining firms when located in states with above-average occupational licensing costs. The results using the matched subsamples are noticeably smaller in magnitude, which indicates that future policy assessments would benefit from ensuring that the sample pool, when dealing with self-employment, is limited only to firms under a common convex hull in order to not skew the size of results.Originality/valueThis study contributes new understanding of the financial relationship of self-employed firms and occupational licensing costs using firm-level observations of sales and firm structure. This has important policy implications for the development and evaluation of occupational licensing policies when considering effects on the self-employed.

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The Effects of Occupational Licensing: Evidence from Business‐Level Data

Cited by 13 publications

References 40 publications

Occupational licensing's effects on firm location and employment in the United States

Occupational licensing's effects on firm location and employment in the United States

How Labor Market Institutions Matter for Worker Compensation

Does occupational licensing costs disproportionately affect the self-employed?

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