Working Paper: CEPR ID: DP12577
Authors: Maria Koumenta; Mario Pagliero
Abstract: We present the first EU-wide study on the prevalence and labour market impact of occupational regulation in the EU. Drawing on a new EU Survey of Regulated Occupations, we find that licensing affects about 22 percent of workers in the EU, although there is significant variability across member states and occupations. On average, licensing is associated with a 4 percent higher hourly wages. Using decomposition techniques we show that rent capture accounts for one third of this effect and the remaining is attributed to signalling. We find considerable heterogeneity in the wage gains by occupation and level of educational attainment. Finally, occupational licensing increases wage inequality. After accounting for composition effects, licensing increases the standard deviation of wages by about 0.02 log points.
Keywords: occupational regulation; licensing; wages
JEL Codes: J44; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Occupational licensing (J44) | Wages (licensed workers) (J31) |
| Occupational licensing (J44) | Wage inequality (J31) |
| Wages (licensed workers) (J31) | Wage premium attributable to rent capture (D33) |
| Wages (licensed workers) (J31) | Wage premium attributable to signaling effects (J31) |
| Occupational licensing (J44) | Wage gains heterogeneity (J31) |
| Occupational licensing (J44) | Wage premium for craft and related trades (J39) |
| Occupational licensing (J44) | Wage premium for professionals (J31) |