Now You Can Take It with You: Effects of Occupational Credential Recognition on Labor Market Outcomes

Abstract

Occupational credentials are typically not portable across geography. Using policy reforms by U.S. states, we show that the limited portability of occupational licenses constrains labor market activity and geographic mobility of licensed individuals. After states implement universal recognition, a policy that allows individuals with occupational licenses issued by other states to work without repeating a costly relicensing procedure, we find that the employment ratio increases by 0.98 percentage points among licensed individuals in the sample relative to unlicensed individuals. The employment effect is co-driven by additional labor market participation and a reduction in unemployment after the policy. With the employment effect, we also find some evidence of a decline in hourly wages among licensed individuals after the policy. Regarding geographic mobility, we show that migration into states with universal recognition increased by 0.77 percentage points or 48.4% among individuals with low portability licenses. Our findings suggest that universal recognition improves license portability and labor market efficiency

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