The Spillover Effects of Labor Regulations on the Structure of Earnings and Employment: Evidence from Occupational Licensing

Abstract

This paper measures the effects of labor regulations on the structure of earnings and employment in the context of occupational licensing. Using a state border match design, I estimate the labor market spillovers of licensing on other occupations with similar skills, which I classify using hierarchical clustering techniques on skills data from O*NET. I find evidence of negative earnings and employment spillovers, with the largest earnings effects concentrated among women, black, and foreign-born Hispanic workers. These effects lead to greater earnings inequality. The results are consistent with a monopsony model where licensing increases search costs and reduces workers’ outside options.

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Working Paper
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Samuel Dodini
Postdoctoral Fellow in Labor Economics

My broad research interests include the economics of labor markets, incorporating insights from behavioral economics, occupational licensing, monopsony power, education, public finance, and urban economics.