Occupational Licenses and Labor Market Outcomes

Using an original survey data of individuals, this paper presents empirical evidence on the relationship between occupational licenses and labor market outcomes. The novelty of this study is that it provides a distinction between the possession and actual use of licenses, as well as a distinction between monopolistic licenses and certifications. Occupational licenses have a large presence in the Japanese labor market. More than half of the respondents in this study hold monopolistic licenses or certifications, and nearly 40% of the respondents use either one of them in their current jobs. The use of licenses and certifications are particularly prevalent in the service sector, such as the health care and education industries. The possession of occupational licenses has positive impacts on the labor market attachment and wages of females and elderly people. On the other hand, occupational licensing may negatively affect market efficiency, through the creation of monopoly rents. While considering the importance of occupational licenses as a trend in the service economy, it is desirable to survey the possession and use of occupational licenses periodically.