Occupational Regulation in the European Union: Coverage and Wage Effects

We present the first EU-wide study on the prevalence and labour market impactof occupational regulation in the European Union. Drawing on a new EU Surveyof Regulated Occupations, we find that licensing affects about 22 per cent ofworkers in the European Union, although there is significant variability acrossmember states and occupations. On average, licensing is associated with a 4per cent higher hourly wage. Using decomposition techniques we show that rentcapture accounts for one-third of this effect and the remainder is attributed tosignalling. We find considerable heterogeneity in the wage gains by occupationand level of educational attainment. Finally, occupational licensing increaseswage inequality. After accounting for composition effects, licensing increases thestandard deviation of wages by about 0.02 log point