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Barrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants

Xing Xia

Labour Economics, 2021, vol. 71, issue C

Abstract: Economic theory suggests that occupational licensing can be a barrier to entry that restricts labor supply (Friedman, 1962; Stigler, 1971) or a signal of quality that enhances the labor market (Leland, 1979). This paper studies two types of licenses for dental assistants (DAs) in the U.S. to illustrate the competing supply-restricting and quality-signaling effects of licensing on minority workers. Specifically, I study the effects of introducing the X-ray permit, a state-issued license to perform X-ray procedures that also carries information about a DA’ s competence, against that of the entry-level license, which provides little information about a DA’ s competence. I find that the X-ray permit requirement reduces the wage gap between non-Hispanic white and minority DAs by 8 percent, presumably because it helps minority DAs secure jobs that entail X-ray procedures. In contrast, entry-level licensing does not reduce the racial wage gap. These findings suggest that licensing alleviates statistical discrimination if it reveals information about the holder’ s productivity.

Keywords: Occupational licensing; Statistical discrimination; Wage inequality; Scope of practice (search for similar items in EconPapers)
JEL-codes: I18 J3 J44 J7 K31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:71:y:2021:i:c:s0927537121000622

DOI: 10.1016/j.labeco.2021.102027

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