Author ORCID Identifier

https://orcid.org/0000-0002-9886-0644

Year of Publication

2020

Degree Name

Doctor of Philosophy (PhD)

Document Type

Doctoral Dissertation

College

Business and Economics

Department/School/Program

Economics

First Advisor

Dr. John Garen

Abstract

Occupational choice at the margin depends on both the incentives for entry and barriers to entry. The primary entry barrier determined by regulation is an occupational license. These are government laws determining the minimum qualifications to enter an occupation including education, testing, fees, and background checks. These regulations are currently enforced on 25% of the US labor market. The laws are crafted to protect consumers from unsafe goods and services but also have important consequences in labor market outcomes. The consequences may include fewer workers entering the profession, changes to which workers enter the profession, and altering competition, all of which could adjust price and quality. Essays 1 and 2 analyze the impact of occupational licensing entry barriers first for the entire US labor market and then for real estate agents. Essay 2 also investigates the entry incentives of new agents by using local housing price changes to investigate the labor response. Essay 3 extends the analysis of entry incentives by focusing on the long run real estate agent labor response and the asymmetric response of real estate agents during the 2008-2011 housing crisis.

Essay 1 analyzes the impact of occupational licensing laws on the US labor market broadly. Using survey data from 2015-2018, this essay analyzes the occupational licensing wage premium in the United States. The estimates show a robust 4-6% wage differential for licensed workers. This premium is robust to careful control for location/local labor market effects and occupation effects. The premium is also positive for the majority of individual occupations and groups of occupations estimated. Similar results are found using additional techniques, including a matching estimator and an analysis of border metropolitan statistical areas.

Essay 2 investigates occupational licensing entry barriers in the real estate industry. The housing market is one of the largest economic markets in the United States, and the associated labor market for real estate agents is dynamic and responsive to housing fluctuations. This essay examines the labor market response of real estate agents to price changes and the potential effects of entry costs on labor supply, earnings, quality, and productivity. Data from the 2012-2017 American Community Survey are linked to local housing price fluctuations, sales, and days on the market for 100 large metro areas. The cost of entry associated with occupational licensing for new real estate agents is interacted with housing fluctuations to investigate the impact of entry barriers. The essay finds that a 10% increase in housing prices is associated with a 4% increase in the number of agents. However, increased license stringency reduces the labor market response by 30%. Younger workers and women are more responsive to entry costs. In the absence of entry costs, earnings do not increase as home prices increase, but higher entry costs are associated with higher earnings. The results also suggest that entry costs are not associated with higher quality, but the effect on productivity is inconclusive. This work contributes to the growing literature investigating the impact of occupational licensing on labor markets as well as the impact of regulation on dynamism and entrepreneurship.

Essay 3 further investigates entry incentives in the real estate agent labor market. Housing prices increased from 2005-2007, decreased from 2008-2011, and increased after 2012. This essay investigates the labor response of real estate agents to local housing price fluctuation from 2005-2017 using the American Community Survey and housing data from the Federal Housing Finance Agency. This turbulent housing market not only allows for the agent response estimates to be updated but also allows for a unique look into the asymmetric response of the agent labor market during a declining housing market. A 10% increase in housing prices over this period is associated with a 4.1% increase in the number of agents. The responsiveness is at its highest during the crisis with a 5.1% decrease in agents for a 10% decrease in housing prices. While the labor market had a large response during the crisis, there is a weak association of earnings and local housing prices during this period, which differs from previous research. This suggests the labor market did not fully respond to the housing decline on the extensive margin and prices fell faster than agents exited the industry. An analysis of the flow of agents is also conducted from 1977-2017. This includes the destination occupations for exiting agents as well as the origin occupations for new agents. While more agents exited during the housing crisis and the labor market performed poorly during this period, exiting agents did not experience relatively worse outcomes.

Digital Object Identifier (DOI)

https://doi.org/10.13023/etd.2020.264

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