Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule

56 Pages Posted: 6 Jan 2017 Last revised: 15 May 2018

See all articles by John Manuel Barrios

John Manuel Barrios

University of Chicago - Booth School of Business

Date Written: April 23, 2018

Abstract

I examine the effects of mandatory occupational licensure on the quality of Certified Public Accountants (CPAs) using the staggered state-level adoption of the 150-hour Rule (the Rule). Although the Rule reduces the number of entrants into the profession, an analysis of labor market outcomes shows that accountants subject to the Rule are more likely to be employed at a Big 4 public accounting firm and specialize in taxation. However, accountants subject to the Rule have the same likelihood of promotion, the same duration until promotion, and exit public accounting at faster rates than their non-Rule counterparts. Moreover, Rule accountants earn a wage premium relative to non-Rule accountants. These findings suggest that restrictive licensing laws reduced the supply of new CPAs and increased rents to the profession without drastically improving quality in the labor market.

Keywords: The 150-Hour Rule, Occupational Licensure, CPA Licensure, Screening, Human Capital, Labor Market Outcomes, Hazard Rate Model

JEL Classification: D45, I21, J2, K2, L51, M4

Suggested Citation

Barrios, John Manuel, Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule (April 23, 2018). Becker Friedman Institute for Research in Economics Working Paper No. 2018-32. Available at SSRN: https://ssrn.com/abstract=2893909 or http://dx.doi.org/10.2139/ssrn.2893909

John Manuel Barrios (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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