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Entry Barriers and the Labor Market Outcomes of Incumbent Workers: Evidence from a Deregulation Reform in the German Crafts Sector

Philipp Lergetporer (), Jens Ruhose () and Lisa Simon ()
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Philipp Lergetporer: Ifo Institute for Economic Research

No 11857, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We study the labor market outcomes of a deregulation reform in Germany that removed licensing requirements to become self-employed in some occupations. Using longitudinal social security data, we implement a matched difference-in-differences design with entropy balancing to account for observable characteristics and unobserved individual heterogeneity. The reform tripled the number of businesses within ten years and led to slower earnings growth and higher unemployment for incumbent workers in deregulated occupations. However, the reform effect seems rather small, which we attribute to the relatively low competitiveness of new businesses. Supporting this view, the reform did not lead to overall employment growth.

Keywords: deregulation; entry barriers; self-employment; labor market outcomes; entropy balancing; matched difference-in-differences (search for similar items in EconPapers)
JEL-codes: J31 J24 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-eur and nep-lma
Date: 2018-09
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