Analyzing Occupational Licensing Across Nations

Abstract

Relatively little is known about occupational licensing across nations. Despite a large literature on occupational licensing in the United States, cross-national evidence remains scarce, especially for developing economies. We assemble harmonized estimates of licensing prevalence for 44 countries by combining new nationally representative surveys (including newly conducted nationally representative surveys for a number of previously unstudied countries) for several Latin American, African, Asian, European, and North American estimates. We document substantial cross-country dispersion in occupational licensing prevalence, ranging from roughly 14 percent of workers in Denmark to more than 40 percent in India and South Africa, the two most heavily licensed labor markets in our sample. Across countries, licensed workers generally earn higher wages than comparable unlicensed workers, with pooled Mincerian regressions implying a licensing wage premium of roughly 14 percent after controlling for worker characteristics and country fixed effects. Occupational licensing prevalence is also negatively associated with GDP per capita and governance quality, and positively associated with informal employment. While these relationships are descriptive rather than causal, they suggest that occupational licensing may be intertwined with broader institutional characteristics affecting labor market efficiency, formal-sector participation, and long-run economic development.

Keywords: Occupational Licensing, Regulation, Growth JEL Codes: J44, institutions, Labor Economics

JEL Classification: J44, J31, O15, K23, O43