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Does Occupational Licensing Reduce Job Loss During Recessions?

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Listed:
  • Peter Q. Blair
  • Bobby W. Chung

Abstract

Licensed workers could be shielded from unemployment during recession since occupational licensing laws are asymmetric—making unlicensed workers an illegal substitute for licensed workers but not the reverse. We test our hypothesis using a difference-in-differences event study research design that exploits cross-state variation in licensing laws to compare the unemployment rate between licensed and unlicensed workers before and after the COVID-19 recession and the Great Recession. Controlling for worker ability, we find that licensing shields workers from a recession-induced increase in the unemployment rate of 0.82 p.p. during COVID-19 and 1.11 p.p. during the Great Recession.

Suggested Citation

  • Peter Q. Blair & Bobby W. Chung, 2024. "Does Occupational Licensing Reduce Job Loss During Recessions?," NBER Working Papers 32486, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32486
    Note: DAE ED IFM LE LS
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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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