Working Paper: CEPR ID: DP13076
Authors: Mario Pagliero
Abstract: The combination of occupational licensing at the local market level often coexists with labor mobility across local markets.We empirically study a labor market in which a district-specific entry (licensing) examination is coupled with labor mobility across districts.Our analysis exploits a change in the grading procedure of the exam, from grading in the local district to grading in a randomly assigned different district.We document that licensing regulation leads to extreme heterogeneity across markets in admission outcomes (up to 50 percent differences in licensing exam pass rates), unfair (discriminatory) admission procedures (up to 49 percent unfair exam results), and inefficient mobility of workers. These findings, together with the estimated impact of the reform on exam outcomes and grading standards, provide the first evidence of regulatory competition based on strategic interaction among licensing boards.
Keywords: Labor market regulation; Occupational regulation; Licensing; Legal market; Bar exam
JEL Codes: J08; J44; L84; L50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| licensing regulation (D45) | extreme heterogeneity across markets in admission outcomes (D29) |
| reform introduced in 2004 (E69) | reduction in differences in pass rates across districts (I24) |
| 10% increase in the pass rate due to decrease in grading standards (C29) | 39% increase in net outmigration of licensed lawyers (K37) |
| regulatory change (L51) | decreased unfairness of grading procedures (I24) |
| competition among local licensing boards (D45) | varied grading standards (L15) |