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  4. May 2021
  5. A Model of Occupational Licensing and Statistical Discrimination

AEA Papers and Proceedings

ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)

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A Model of Occupational Licensing and Statistical Discrimination

  • Peter Q. Blair
  • Bobby W. Chung
AEA Papers and Proceedings
vol. 111, May 2021
(pp. 201–05)
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Abstract

We develop a model of statistical discrimination in occupational licensing with endogenous occupation selection and wage determination. We find a unique equilibrium with sharp comparative statics. Our key theoretical result is that the licensing premium is higher for workers who are members of demographic groups that face a higher cost of licensing. The predictions of the model can explain, for example, the empirical finding in the literature that occupational licenses that preclude felons close the racial wage gap among men by conferring a higher premium to Black men than to White men (Blair and Chung 2018).

Citation

Blair, Peter Q., and Bobby W. Chung. 2021. "A Model of Occupational Licensing and Statistical Discrimination." AEA Papers and Proceedings, 111: 201–05. DOI: 10.1257/pandp.20211112

Additional Materials

JEL Classification

  • J44 Professional Labor Markets; Occupational Licensing
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
  • D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
  • J71 Labor Discrimination