The Industry Costs and Benefits of Occupational Licensing: Measuring Differences in Establishment Behavior and Quality

Publication Date

1-20-2026

Document Type

Article

Publication Title

Journal of Regulatory Economics

Volume

69

Issue

1

DOI

10.1007/s11149-025-09502-y

Abstract

Although the monopoly effects of occupational licensing are generally understood for the broader labor market, industry-specific estimates of the costs and benefits from licensing have presented significant logistical challenges in the literature. We first present a theoretical model of firm behavior under licensure and develop two new occupation crosswalks between licensing data, NAICS codes, and ratings data to provide the first firm-level study estimating both the costs and benefits for 38 occupations. We then employ linear regression to estimate the effects of licensing on establishment behavior, employment, and quality as measured by consumer ratings, using a sample of 15 million U.S. establishments. Licensing is associated with fewer per capita establishments within a county, although licensing shifts some labor from employment to contract work. We identify differential effects from licensing by type of industry and employment and find less self-employment and a higher average number of employees in licensed industries. Finally, licensing requirements are not generally associated with higher quality, as measured by consumer ratings, and in some cases are associated with lower quality.

Funding Number

IHS019165

Funding Sponsor

Institute for Humane Studies, George Mason University

Keywords

Firm behavior, Location choice, Occupational licensing, Quality

Department

Economics

Link to Full Text

Share

COinS