NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Analyzing the Influence of Occupational Licensing Duration on Labor Market Outcomes

Suyoun Han, Morris M. Kleiner

NBER Working Paper No. 22810
Issued in November 2016, Revised in November 2016
NBER Program(s):IO, LE, LS

We analyze the labor market influence of the duration of occupational licensing statutes for 12 major universally licensed occupations over a 73 year period. These occupations comprise the vast majority of workers in these regulated occupations in the United States. Time from the start of state occupational licensing statutes (i.e., licensing duration) may matter in influencing labor market outcomes. Adding to or raising the entry barriers is likely easier once an occupation is established and has gained influence in a political jurisdiction. States often enact grandfather clauses and ratchet up requirements that protect existing workers and increase entry costs to new entrants. We provide among the first estimates of potential economic rents to grandfathering. We find that duration years of occupational licensing are positively associated with wages for continuing and grandfathered workers. The estimates show a positive relationship of duration with hours worked, but we find moderately negative results for participation in the labor market. The universally licensed occupations, however, exhibit heterogeneity in outcomes. Consequently, unlike some other labor market public policies, such as minimum wages or direct unemployment insurance benefits, occupational licensing would likely influence labor market outcomes when measured over a longer period of time.

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Document Object Identifier (DOI): 10.3386/w22810

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