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  3. 2023
  4. Program
  5. Assessing the Costs and Benefits of Occupational Licensing
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Assessing the Costs and Benefits of Occupational Licensing

Paper Session

Friday, Jan. 6, 2023 2:30 PM - 4:30 PM (CST)

Hilton Riverside, Grand Salon B Sec 9
Hosted By: American Economic Association
  • Chair: Morris M. Kleiner, University of Minnesota

Does Occupational Licensing Reduce the Effectiveness of Customer Search on Digital Platforms?

Peter Blair
,
Harvard University
Mischa Fisher
,
Angi Inc. and Northwestern University

Abstract

We study whether occupational licensing requirements reduce the likelihood that
customers engaged in search on digital platforms can find service providers. Our
setting is a large online marketplace in the $500B home services industry where we
observe task-level variation in occupational licensing for 21 million transactions. Exploiting two natural experiments — variation in licensing laws within local labor markets that straddle state borders and a change in a state licensing law — we find that
licensing reduces the success rate of customer search by 25 percent. The reduction in
the success rate of customer search in the presence of licensing is fully explained by a
reduction in the labor supply of workers on the platform and not by an increase in customer search. Moreover, licensing reduces the effectiveness of customer search most
severely in sparsely populated areas. Our findings demonstrate that occupational licensing undercuts some of the efficiency gains of moving labor to digital platforms.

Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes

Maria Koumenta
,
Queen Mary University of London
Mario Pagliero
,
University of Turin and Collegio Carlo Alberto
Davud Rostam-Afschar
,
University of Mannheir

Abstract

We study how licensing, certification and unionisation affect the wages of natives and migrants and their
representation among licensed, certified, and unionized workers. We provide evidence of a dual role of labor
market institutions, which both screen workers based on unobservable characteristics and also provide them
with wage setting power. Labor market institutions confer significant wage premia to native workers (3.9,
1.6, and 2.7 log points for licensing, certification, and unionization respectively), due to screening and wage
setting power. Wage premia are significantly larger for licensed and certified migrants (10.2 and 6.6 log
points), reflecting a more intense screening of migrant than native workers. The representation of migrants
among licensed (but not certified or unionized) workers is 14% lower than that of natives. This implies a
more intense screening of migrants by licensing institutions than by certification and unionization.

Access to Care and Physician Mobility Under the Interstate Medical Licensure Compact

Darwyyn Deyo
,
San Jose State University
Sriparna Ghosh
,
University of Cincinnati
Alicia Plemmons
,
Southern Illinois University-Edwardsville

Abstract

Medical professionals in the United States must comply with some of the highest barriers-to-entry among licensed occupations. Although states require additional physician licensing, these licenses do not transfer between states, limiting physician mobility and access to care for patients. The Interstate Medical Licensure Compact (IMLC) addresses this issue by recognizing out-of-state licenses from participating states for physicians with MD or DO credentials. Physicians can change their primary state of practice, practice in multiple states, and provide telehealth services to patients in other states. The first IMLC state legislation passed in 2015 and 29 states now participate in the compact. We estimate whether the IMLC has changed physician migration between IMLC and non-IMLC states using the National Downloadable Files from the Centers for Medicare and Medicaid Services. We apply a staggered difference-in-differences model to estimate whether the IMLC increased the number of practices in which physicians practiced and whether physicians moved to IMLC states. The results suggest that following IMLC there is 4.7% overall new practice growth for physicians, and within this share, there is 1.1% practice growth in IMLC states, representing about 26,500 new practices. Future work will analyze whether IMLC changed the survival rate for physician practices and the location choices of physicians.

Now You Can Take It with You: Estimating the Effects of Universal Recognition on Interstate Migration

Kihwan Bae
,
Saint Francis University
Edward Timmons
,
West Virginia University

Abstract

Occupational licensing has been shown by previous research to limit geographic mobility. Universal recognition is a state policy whereby workers with occupational licenses issued by other states are authorized to work without repeating a costly re-licensing procedure. In this paper, we examine the effect of universal recognition on interstate migration. We use a difference-in-differences model with staggered policy adoptions by 10 states in the U.S. from 2016 to 2020. Our primary data source is the American Community Survey 2014 – 2020. Our preliminary analysis shows that universal recognition increased migration into the treatment state by about 10 percent more than that into the control state. We also find that the average treatment effect is about three times larger in the subsample of licensed individuals with state-specific licensing exams, while it is not statistically different from zero in the subsample of licensed individuals with quasi-national licensing exams. The findings are consistent with previous literature showing that occupational licensing has a particularly restrictive effect on the mobility of licensed individuals with state-specific licensing exams. Moreover, these findings are robust to the exclusion of healthcare workers whose mobility might be affected by interstate-compacts or temporary relaxation of licensing requirements upon the COVID pandemic. This study provides one of the earliest pieces of empirical evidence on a policy measure that reduces unnecessary moving costs of licensed workers and improve their mobility across states. Given that about a quarter of U.S. workers have occupational licenses and that a growing number of states have adopted universal recognition, the policy could add momentum for the rebound of interstate migration in the U.S.

Discussant(s)
Ryan Nunn
,
Federal Reserve Bank of Minneapolis
David Mitchell
,
University of Central Arkansas
Moiz Bhai
,
University of Arkansas-Little Rock
Tingting Zhang
,
University of Illinois-Urbana-Champaign
JEL Classifications
  • J4 - Particular Labor Markets
  • K2 - Regulation and Business Law