Download This PaperBarrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants
64 Pages Posted: 21 May 2020 Last revised: 13 Dec 2021
Date Written: April 22, 2020
Abstract
Economic theory suggests that occupational licensing can be a barrier to entry that restricts labor supply (Friedman, 1962; Stigler, 1971) or a signal of quality that enhances the labor market (Leland, 1979). This paper studies two types of licenses for dental assistants (DAs) in the U.S. to illustrate the competing supply-restricting and quality-signaling effects of licensing on minority workers. Specifically, I study the effects of introducing the X-ray permit, a state-issued license to perform X-ray procedures that also carries information about a DA’s competence, against that of the entry-level license, which provides little information about a DA’s competence. I find that the X-ray permit requirement reduces the wage gap between non-Hispanic white and minority DAs by 8 percent, presumably because it helps minority DAs secure jobs that entail X-ray procedures. In contrast, entry-level licensing does not reduce the racial wage gap. These findings suggest that licensing alleviates statistical discrimination if it reveals information about the holder’s productivity.
Keywords: Occupational Licensing, Statistical Discrimination, Wage Inequality, Scope of Practice
JEL Classification: J44, J7, K31, I18, J3
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