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- Title
A Welfare Analysis of Occupational Licensing in U.S. States.
- Authors
Kleiner, Morris M; Soltas, Evan J
- 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.
- Subjects
PROFESSIONAL licenses; JOB analysis; LABOR supply; HUMAN capital; MARKET equilibrium; WILLINGNESS to pay; WAGE increases; CONSUMERS' surplus
- Publication
Review of Economic Studies, 2023, Vol 90, Issue 5, p2481
- ISSN
0034-6527
- Publication type
Article
- DOI
10.1093/restud/rdad015