Occupational Licensing in a "Competitive" Labor Market: The Case of Cosmetology*

A. Frank Adams, John Jackson and Robert Ekelund

Journal of Labor Research, 2002, vol. 23, issue 2, 261-278

Abstract: A straightforward model of supply and demand is developed to analyze the regulation of a "competitive" industry -- cosmetology -- with demand shifts representing an enhancement of "quality" and supply shifts representing restricted entry. Reducedform models are established to estimate both price and quantity shifts, adjusted for the joint determination of cosmetological prices, quantities, and state regulations. Our results reveal a significant net decrease in quantity from the imposition of state occupational regulation in the cosmetology market. Rents to cosmetologists would be on the order of $1.7 billion per year with deadweight losses totaling an additional $111 million per annum under reasonable and conservative assumptions.

Date: 2002
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