Working Paper: NBER ID: w29318
Authors: John M. Barrios
Abstract: I examine the effects of occupational licensing on the quality of Certified Public Accountants (CPAs). I exploit the staggered adoption of the 150-hour rule, which increases the educational requirements for a CPA license. The analysis shows that the rule decreases the number of entrants into the profession, reducing both low- and high-quality candidates. Labor market proxies for quality find no difference between 150-hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality to their non-rule counterparts. Overall, these findings are consistent with the theoretical argument that increases in licensing requirements restrict the supply of entrants and do little to improve quality in the labor market.
Keywords: occupational licensing; CPA quality; 150-hour rule; labor market outcomes
JEL Codes: D45; I21; J2; K2; L51; M1; M12; M21; M4; M40; M41; M5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduction in the number of first-time candidates taking the CPA exam (M41) | complicates inference about quality improvements based on pass rates (L15) |
| 150-hour rule (Y20) | reduction in the number of first-time candidates taking the CPA exam (M41) |
| 150-hour rule (Y20) | no significant difference in career outcomes between CPAs who complied and those who did not (M48) |
| 150-hour rule (Y20) | no substantial evidence affecting CPAs' retention in public accounting (M51) |
| 150-hour rule (Y20) | no significant effect on written communication skills as measured through resume analysis (J29) |