Events

Prof. Roman Galperin
Associate Professor of Organizational Behaviour
McGill University

Occupational licensure is a much-discussed policy issue.  Most analysts assume that, because licensure increases barriers to entry into an occupation, it also depresses entrepreneurship, especially so for disadvantaged workers like racial minorities.  We argue that licensure offers a signal of quality and legitimacy to producers.  We further argue that customers discount services rendered by minority practitioners more in the absence of licensure.  Therefore,  the relationship between  licensure  and  entrepreneurship  can  be  positive,  especially  for  disadvantaged  groups. Using  panel data  on  the  population  of  tax  preparers  in  the  U.S.,  we  test whether state-level licensure is associated with lower rates of entry into tax preparation but also higher rates of entrepreneurship.  We show that the effects vary by race and the average quality of the market.  Our findings suggest that licensure may offer nascent entrepreneurs a signal of quality and legitimacy that may reduce customer discrimination against minority producers.