In most occupations, licensing is associated with lower unemployment rates, even after adjusting for observable worker differences. Another way to describe this result is that unlicensed workers bear a greater burden of unemployment. Intuitively, licensing creates “crowding” in unlicensed occupations and labor scarcity in licensed occupations, driving a wedge between the unemployment rates in the two sectors. This suggests that researchers have been underestimating the magnitude of the advantage conferred by licensing. Not only does licensing redistribute earnings from unlicensed to licensed workers; it also shifts the burden of unemployment away from licensed workers.
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