Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector

70 Pages Posted: 8 Oct 2018

See all articles by Philipp Lergetporer

Philipp Lergetporer

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Jens Ruhose

Leibniz Universität Hannover - Faculty of Economics and Management

Lisa Simon

CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.

Keywords: deregulation, entry barriers, self-employment, labor market outcomes, entropy balancing, matched difference-in-differences

JEL Classification: J31, J24, L11

Suggested Citation

Lergetporer, Philipp and Ruhose, Jens and Simon, Lisa, Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector. IZA Discussion Paper No. 11857, Available at SSRN: https://ssrn.com/abstract=3261716

Philipp Lergetporer (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Dresden Branch
Einsteinstraße 3
Dresden, 01069
Germany

Jens Ruhose

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

Lisa Simon

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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