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Examining the Macroeconomic Costs of Occupational Entry Regulations

Author

Listed:
  • Joel Bowman

    (NSW Treasury)

  • Jonathan Hambur

    (Reserve Bank of Australia)

  • Nathan Markovski

    (NSW Treasury)

Abstract

Occupational entry regulations (OER) are legal requirements that people need to meet to enter certain professions. They are intended to protect consumers by ensuring providers are of sufficient quality – but they can also create costs by making it harder for new workers to enter a profession or for new firms to open and grow. In this paper we construct a database of OER stringency across three states and a number of occupations to better understand these potential costs. We find that for services provided to consumers (businesses), OER tend to be more (less) stringent in Australia compared with the average OECD country. In most occupations OER are more stringent in Australia compared to the least stringent OECD country. We find that more stringent OER are associated with lower business entry and exit rates, and a slower flow of workers from less to more productive firms, both of which may have negative implications for productivity. We also find some tentative evidence that OER tend to be associated with skill shortages. These results do not necessarily suggest that OER should be less stringent. But they fill a gap in our understanding of the effects of OER, which can help policymakers going forward.

Suggested Citation

  • Joel Bowman & Jonathan Hambur & Nathan Markovski, 2024. "Examining the Macroeconomic Costs of Occupational Entry Regulations," RBA Research Discussion Papers rdp2024-06, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2024-06
    DOI: 10.47688/rdp2024-06
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    References listed on IDEAS

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    1. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2020. "Changing Business Dynamism and Productivity: Shocks versus Responsiveness," American Economic Review, American Economic Association, vol. 110(12), pages 3952-3990, December.
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    4. Dan Andrews & David Hansell, 2021. "Productivity‐Enhancing Labour Reallocation in Australia†," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 157-169, June.
    5. Jonathan Hambur, 2023. "Product Market Competition and its Implications for the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 99(324), pages 32-57, March.
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    More about this item

    Keywords

    productivity; dynamism; occupational regulations;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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