Job Market Signaling Through Occupational Licensing

Peter Q. Blair and Bobby W. Chung
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Peter Q. Blair: Harvard University and NBER
Bobby W. Chung: University of South Florida

The Review of Economics and Statistics, 2025, vol. 107, issue 2, 338-354

Abstract: Among men, the Black-White wage gap is as large today as it was in 1950. We test whether this gap is due to asymmetric information using newly collected data on occupational licensing laws that ban workers with criminal records. We find evidence supporting this hypothesis. The licensing premiums for Black men are largest in licensed occupations that restrict felons, particularly in states with banthe-box laws and at small businesses. In these contexts where a worker’s criminal history is difficult to infer, we find that occupational licensing reduces asymmetric information and reduces the racial wage gap.

Date: 2025
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