The Effects of Occupational Licensing Evidence from Detailed Business-Level Data

55 Pages Posted: 1 Mar 2017

Date Written: February 01, 2017

Abstract

Occupational licensing regulation has increased dramatically in importance over the last several decades, currently affecting more than one thousand occupations in the United States. I use confidential U.S. Census Bureau micro-data to study the relationship between occupational licensing and key business outcomes, such as number of practitioners, prices for consumers, and practitioners’ entry and exit rates. The paper sheds light on the effect of occupational licensing on industry dynamics and intensity of competition, and is the first to study the effects on providers of required occupational training. I find that occupational licensing regulation does not affect the equilibrium number of practitioners or prices of services to consumers, but reduces significantly practitioner entry and exit rates. I further find that providers of occupational licensing training, namely, schools, are larger and seem to do better, in terms of revenues and gross margins, in states with more stringent occupational licensing regulation.

Keywords: Cosmetology, Competition, Entry, Exit, Industry Dynamics, Regulation, Schools

Suggested Citation

Zapletal, Marek, The Effects of Occupational Licensing Evidence from Detailed Business-Level Data (February 01, 2017). US Census Bureau Center for Economic Studies Paper No. CES-WP-17-20. Available at SSRN: https://ssrn.com/abstract=2925226 or http://dx.doi.org/10.2139/ssrn.2925226

Marek Zapletal (Contact Author)

The Brattle Group ( email )

201 Mission Street, Suite 2800
San Francisco, CA 94105
United States

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