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Does occupational licensing impact incomes? - The German crafts case

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  • Fredriksen, Kaja

Abstract

The empirical literature on occupational licensing finds standard monopoly effects of entry regulations: Less competition and economic rents for professionals. I exploit the natural experimental design of a change in the German crafts regulation in 2004, which removed the traditional licensing requirement only for certain trades, and find no robust effects. I point out that existing studies on the income effects of occupational licensing suffer from methodological weaknesses. Most studies rely on cross-section estimates that are likely to be biased due to unobserved heterogeneity whereas others do not rigorously define the population of interest. Based on my results, I suggest that demand-effects and market saturation have so far been inadequately discussed in the literature.

Suggested Citation

  • Fredriksen, Kaja, 2018. "Does occupational licensing impact incomes? - The German crafts case," ifh Working Papers 11 (2018), Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh), revised 2018.
    • Handle: RePEc:zbw:ifhwps:112018
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    2. Davud Rostam-Afschar, 2014. "Entry regulation and entrepreneurship: a natural experiment in German craftsmanship," Empirical Economics, Springer, vol. 47(3), pages 1067-1101, November.
    3. Peter Hoeller & Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 1. Mapping Income Inequality Across the OECD," OECD Economics Department Working Papers 924, OECD Publishing.
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    Cited by:

    1. Lukesch, Veronika & Zwick, Thomas, 2021. "Outside options drive wage inequalities in continuing jobs: Evidence from a natural experiment," ZEW Discussion Papers 21-003, ZEW - Leibniz Centre for European Economic Research.
    2. Bizer, Kilian & Haverkamp, Katarzyna & Proeger, Till, 2019. "Stellungnahme zur Wiedereinführung der Meisterpflicht im Handwerk," Göttinger Beiträge zur Handwerksforschung 31, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).

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    More about this item

    Keywords

    Labor markets; occupational licensing; monopoly rent; natural experiment; craftsmanship;
    All these keywords.

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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