How Do Occupational Licensing Requirements Affect the Size of the U.S. Legal Profession?

Abstract

I investigate the effect of occupational licensing requirements on the size of the U.S. legal profession from 1980 to 2019. In particular, I estimate not only the overall effect of licensing but also the relative quantitative importance of individual licensing requirements and the underlying causal channels driving the aggregate labor supply response. I report three primary findings. First, I find that the bar exam has a much larger impact on the size of the legal profession than the law degree requirement. Second, I find that differences between the most lenient and strictest bar exam policies would affect the size of the legal profession more than eliminating the bar exam. Finally, I find that small and often overlooked policies on the timing of licensing cumulatively have a non-trivial effect on the size of the legal profession.

Keywords: Occupational Licensing, Labor Supply, Legal Profession

JEL Classification: J44, J21, L43, K23