The Economics of Occupational Licensing

The Economics of Occupational Licensing

It should be noted parenthetically that, while licensing causes the mean quality of legal practitioners to rise, by excluding those at the lower part of the qualitative range who could have practiced legally in the absence of a licensing statute, it does not necessarily cause the mean quality of the relevant service to rise. Whether it does or not turns on the behavior of consumers of the service after the trade has been licensed, who in the absence of licensing would have employed the qualitatively low tradesmen who sold their services at correspondingly low prices. If consumers substitute for low-quality barbers, who are now not permitted to practice, the haircutting services of their wives, the qualitative mean falls; if they substitute the services of higher-quality barbers, the qualitative mean rises. If both occur, as is likely, the outcome is an arithmetic consequence of the magnitudes of opposite movements.

Simon Rottenberg



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