Occupational entry regulations and their effects on productivity in services: Firm-level evidence

Abstract

RESUME Occupational entry regulations and their effects on productivity in services: firm-level evidenceThis paper assesses the link between occupational entry regulations (OER) and labour productivity. It combines international firm-level productivity data with the new composite indicator measuring the stringency of OER in terms of administrative burdens, qualifications requirements, and mobility restrictions estimated in von Rueden and Bambalaite (2020). The analysis is performed for 11 EU countries, for three professional and eight personal services. The evidence suggests that bold reforms easing OER, especially those concerning qualification requirements, could help increase the contribution of personal and professional services to aggregate productivity growth via two channels: the improvement in firm-level productivity growth, where the average firms in regulated sectors could gain around 1.5 percentage points on impact; and a higher contribution of labour reallocation to firms' employment growth, which could increase by up to 10 percent for the most productive firms. Given the scope for reform highlighted by crosscountry differences in regulatory approaches and the potential positive effects on productivity of such reforms, our results are supportive of the need to (i) review regulations in the light of changing public interests, technological developments and international experience, (ii) shift the focus of regulations from inputs to outputs wherever possible, and (iii) check the implications of regulations for competition and explore new ways to deliver better information to consumers.JEL classification codes: J44 ;O43; L5; O57; L16; C21. Les effets de la certification professionnelle sur la productivité des services: Résultats au niveau d'entrepriseCette étude évalue les liens potentiels entre les critères de certification professionnelle et la productivité du travail. L'étude s'appuie à la fois sur des données internationales de productivité au niveau d'entreprise et sur un nouvel indicateur (proposé par von Rueden et Bambalaite, 2020) comparant à travers plusieurs pays la sévérité des critères administratifs, de qualification et de mobilité. L'analyse concerne onze pays européens, trois services professionnels et huit services à la personne. Nos résultats suggèrent que réformer ces critères, spécialement le niveau de qualifications requis, pour faciliter l'accès au marché des prestateurs de ces services pourrait renforcer leur contribution à la croissance de la productivité agrégée de deux façons: cela pourrait accélérer la vitesse à laquelle les entreprises s'approchent des meilleures pratiques internationales, un canal interne aux entreprises à travers lequel leur croissance augmenterait en moyenne d'environ 1,5 points en pourcentage selon nos estimations; et cela pourrait aussi conduire à une plus forte croissance de l'emploi dans les entreprises les plus productives, un canal de réallocation à travers lequel ces entreprises pourraient augmenter leur avantage d'embauche vis à vis des entreprises m...

The decline in labour mobility in the United States: Insights from new administrative data

“…United States: Insights from new administrative data productivity growth (Hermansen, 2019;Bambalaite et al, 2020). Empirical analysis using the same data as in this paper finds that occupational licensing is associated with lower job hire rates, particularly for interstate job-to-job moves towards States with more stringent occupational licensing regulation (Hermansen, 2019).…”

Anti-competitive and regulatory barriers in the United States labour market

“…In the short term when an occupation becomes licensed, earnings may rise fast as employees benefit from the new entry barrier that can drive up prices and wages. In the longer term, reduced competition and weaker labour mobility will tend to reduce productivity growth (Bambalaite et al, 2020), reducing the scope for earnings growth relative to unlicensed occupations and States with more lenient regulation. The background work produced for this Survey also analysed earnings and found some evidence of reduced earnings gain from job-to-job moves towards States with larger coverage or higher strictness of licensing regulation in the same industry (Hermansen, 2019).…”

“…In some States, such as Arizona and Georgia, (journeyman) electricians do not need an occupational licence as long as they work for a licensed electrical contractor. In many European countries, licensing of "masters" only are common for plumbers, electricians and similar professions (Bambalaite et al, 2020).…”

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Reducing regional disparities for inclusive growth in Bulgaria

“…The licensing regime aims at easing the current administrative burdens and will require renewal of licences every five years. This should be evaluated in follow-up reviews since experience from OECD countries indicate little impact of licensing on quality of services and large potential costs to employment and productivity (OECD, 2020c;Bambalaite et al, 2020). Burdens that restrict supply and reduce competition could be particularly costly in low-density areas.…”