Occupational Licensing and Quality: Distributional and Heterogeneous Effects in the Teaching Profession
This paper examines a common form of entry restriction: occupational licensing. The paper studies two questions: first, how occupational licensing laws affect the distribution of quality, and second, how the effects of licensing on quality vary across regions of differing income levels. The paper uses variation in state licensing requirements for teachers and two national datasets on teacher qualifications and student outcomes from 1983–2008. Two measures of quality are used: the qualifications of candidates entering the occupation (input quality) and the quality of service provided (output quality). Results show that more restrictive licensing laws—in the form of certification tests required for initial licensure—may lead some first-year teachers of high input quality to opt out of the occupation. In the sample of teachers who remain in the occupation multiple years, stricter licensing appears to increase input quality at most quantiles of the teacher quality distribution. Output quality, as measured by student test scores, also changes with stricter occupational licensing, revealing a widening of the distribution. For most forms of licensing studied, input and output quality improvements due to stricter licensing requirements occur in high-income rather than low-income school districts.