Occupational Licensing Effects on Firm Entry and Employment
34 Pages Posted: 11 Nov 2018 Last revised: 27 Feb 2019
Date Written: November 25, 2018
Occupational licensing is a government permission to work within a specific job classification. The costs to firms of paying to license employees can be a substantial consideration for businesses who are making entry and employment decisions. In this study, I exploit variations in state-level occupational licensing education and experience requirements to analyze the entry and employment decisions of firms located near state borders. I find that firms are less likely to enter the market in more expensive states when there are cheaper alternatives within short distances. These effects on firm entry are much larger in labor-intensive industries. Evidence suggests that average firm employment is lower in high occupational licensing cost states for heavily regulated industries, even after accounting for state and industry attributes.
Keywords: Occupational Licensing, Regulation, Firm Location
JEL Classification: J18
Suggested Citation: Suggested Citation