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Consumer Protection in an Online World: An Analysis of Occupational Licensing

Author

Listed:
  • Chiara Farronato
  • Andrey Fradkin
  • Bradley J. Larsen
  • Erik Brynjolfsson

Abstract

We study the demand and supply implications of occupational licensing using transaction-level data from a large online platform for home improvement services. We find that demand is more responsive to a professional's reviews than to the professional's platform-verified licensing status. We show some evidence that consumers view licenses and reviews as substitutes. We confirm the generality of our findings off the platform in an independent consumer survey. Combining state-level licensing regulation data with platform microdata, we find that more stringent requirements are associated with less competition, higher prices, and no increase in demand or consumer satisfaction.

Suggested Citation

  • Chiara Farronato & Andrey Fradkin & Bradley J. Larsen & Erik Brynjolfsson, 2024. "Consumer Protection in an Online World: An Analysis of Occupational Licensing," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 549-579, July.
    • Handle: RePEc:aea:aejapp:v:16:y:2024:i:3:p:549-79
    DOI: 10.1257/app.20210716
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    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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