Occupational Licensing Effects on Firm Location and Employment

31 Pages Posted: 11 Nov 2018 Last revised: 16 Jun 2020

See all articles by Alicia Plemmons

Alicia Plemmons

Southern Illinois University Edwardsville

Date Written: June 6, 2020

Abstract

Occupational licensing is the mechanism in which a government body imposes minimum requirements to work within a specific job classification. These requirements often include some combination of education credits, experience hours, mandatory fees, and examinations. The costs to firms of paying to license employees can be a substantial consideration when they are making location and hiring decisions since the licensure requirements are often determined at the state level. Using firm-level data, I analyze how these occupational licensing expenses affect firms by determining how differences in those expenses across state borders affect the likelihood of firms locating on a particular side of a border. I find that firms are less likely to locate in an expensive state if a substantially cheaper state is a short distance away. I also utilize a geographic regression discontinuity design and find that the more expensive side of a state border has approximately 2.3 fewer employees on average.

Keywords: occupational licensing, entry regulation, employment, borders, firms

JEL Classification: J18

Suggested Citation

Plemmons, Alicia, Occupational Licensing Effects on Firm Location and Employment (June 6, 2020). Available at SSRN: https://ssrn.com/abstract=3269951 or http://dx.doi.org/10.2139/ssrn.3269951

Alicia Plemmons (Contact Author)

Southern Illinois University Edwardsville ( email )

Edwardsville, IL 62026
United States

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