Occupational Licensing and Accountant Quality: Evidence from the 150-Hour Rule
Journal of Accounting Research, Volume 60, Issue 1, 2022
Posted: 2 May 2022
Date Written: March 1, 2022
I examine the effects of occupational licensing on the quality of certified public accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low- and high-quality candidates. Labor market proxies for quality find no difference between 150-hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their nonrule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market.
Keywords: CPA licensure; hazard rate model; human capital; labor market outcomes; occupational licensure; screening; the 150-hour rule
JEL Classification: D45, I21, J2, K2, L51, M4
Suggested Citation: Suggested Citation