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Title: A Welfare Analysis of Occupational Licensing in U.S. States

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: We assess the welfare consequences of occupational licensing for workers and consumers. We estimate a model of labor market equilibrium in which licensing restricts labor supply but also affects labor demand via worker quality and selection. On the margin of occupations licensed differently between U.S. states, we find licensing raises wages and hours but reduces employment. We estimate an average welfare loss of 15 percent of occupational surplus. Consumers and workers each bear about half of the incidence. Higher willingness to pay offsets only 60 percent of higher prices for consumers, and higher wages compensate workers for only 70 percent of the cost of mandated investment in occupation-specific human capital.

Url: https://site.stanford.edu/sites/g/files/sbiybj8706/f/5521-licensingwelfare.pdf

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Authors: Kleiner, Morris, M; Soltas, Evan, J

Publisher: Stanford

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

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