Occupational Licensing and Asymmetric Information: Post-Hurricane Evidence from Florida
This article will show that government action in times of crisis is often inconsistent with its rhetoric. Licensing is typically justified on the grounds that market mechanisms will not mitigate the problems associated with asymmetric information. In the wake of Hurricanes Frances and Katrina, Florida reduced restrictions on construction contractors, yet in times of crises informational asymmetries are more likely to be problematic. By examining the volume of work completed, I find little evidence of significant detrimental effects from the policy change. Given the relative success of reducing restrictions and the government’s explicit recognition of licensing’s limiting effect on the availability of roofers, reform of licensing, at least to the extent done in crisis, should be adopted permanently.
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