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A Model of Occupational Licensing and Statistical Discrimination

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  • Peter Q. Blair
  • Bobby W. Chung

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).

Suggested Citation

  • Peter Q. Blair & Bobby W. Chung, 2021. "A Model of Occupational Licensing and Statistical Discrimination," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 201-205, May.
    • Handle: RePEc:aea:apandp:v:111:y:2021:p:201-05
    DOI: 10.1257/pandp.20211112
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    Cited by:

    1. Deyo, Darwyyn & Plemmons, Alicia, 2022. "Have license, will travel: Measuring the effects of universal licensing recognition on mobility," Economics Letters, Elsevier, vol. 219(C).
    2. Chung, Bobby W., 2022. "The costs and potential benefits of occupational licensing: A case of real estate license reform," Labour Economics, Elsevier, vol. 76(C).
    3. Slichter, David & Taveras, Elisa & Monge, Daniela, 2021. "The Skills of Rich and Poor Country Workers," MPRA Paper 106050, University Library of Munich, Germany.
    4. Bobby W. Chung, 2024. "Effects of occupational license access on undocumented immigrants evidence from the California reform," Journal of Regulatory Economics, Springer, vol. 65(1), pages 64-83, June.
    5. Busso, Matias & Montaño, Sebastián & Muñoz-Morales, Juan S., 2023. "Signaling Specific Skills and the Labor Market of College Graduates," IZA Discussion Papers 16449, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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