Quality and selection in regulated professions

Michele Pellizzari, Gaetano Basso, Eleonora Brandimarti and Giovanni Pica

No 15674, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Entry in many occupations is regulated with the objective to screen out the least able producers and guarantee high quality of output. Unfortunately, the available empirical evidence suggests that in most cases these objectives are not achieved. In this paper we investigate entry into the legal profession in Italy and we document that such a failure is due to the combination of the incomplete anonymity of the entry exam and the intergenerational transmission of business opportunities. We use microdata covering the universe of law school graduates from 2007 to 2013 matched with their careers and earnings up to 5 years after graduation. Variation generated by the random assignment of the entry exam grading commissions allows us to identify the role of family ties in the selection process. We find that connected candidates, i.e. those with relatives already active in the profession, are more likely to pass the exam and eventually earn more, especially those who performed poorly in law school. When we simulate the process of occupational choice assuming family connections did not matter, we find that strong positive selection on ability would emerge.

Keywords: Occupational regulation; Licensing; Intergenerational mobility (search for similar items in EconPapers)
JEL-codes: J24 J44 J62 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Quality and Selection in Regulated Professions (2021)
Working Paper: Quality and Selection in Regulated Professions (2021)
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