Saturday, February 1, 2014

Henderson on Occupational Licensing

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From the article:

Some evidence suggests that licensing does restrict the supply of workers in regulated occupations. One application focuses on the comparison of occupations that are licensed in some states and not in others. The occupations examined were librarians (licensed in 19 states), respiratory therapists (licensed in 35 states), and dietitians and nutritionists (licensed in 36 states) from 1990 to 2000 using Census data (Kleiner, 2006). Using controls for state characteristics, the multivariate estimates showed that in the states where the occupations were unlicensed there was a 20 percent faster growth rate than in states that did license these occupations. Another study found that the imposition of greater licensing requirements for funeral directors is associated with fewer women holding jobs as funeral directors relative to men by 18 to 24 percent (Cathles, Harrington, and Krynski, 2009).

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The results of these wage equations are consistent with the interpretation that licensing policy enables the individuals in a licensed job to obtain a degree of monopoly control, or the ability to "fence out" competitors for a service, which results in increased wages for licensed workers.

Source: David Henderson, "The Gains from Getting Rid of "Run Amok" Occupational Licensing," econlog.com, January 31, 2014

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