Occupational Licensing and Quality: Distributional and Heterogeneous Effects in the Teaching Profession

Abstract

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 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. The distribution of student test scores also increases with stricter occupational licensing, primarily in the upper half 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, consistent with theoretical predictions of Shapiro (1986).

Keywords: Occupational licensing, entry restrictions, quality, teacher certification