Job Market Signaling through Occupational Licensing
In the presence of occupational licensing, we find evidence that firms rely less on observable characteristics such as race and gender in determining employee wages. As a result, licensed minorities and women experience smaller racial and gender wage gaps than their unlicensed peers. Black men benefit from licenses that are accessible to individuals without criminal records, whereas white women benefit from licenses with a human capital requirement. Certification, a less distortionary alternative to licensing, generates an equivalent wage premium for white men, but lower wage premiums than licensing for women and black men.
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