Consumer Protection in an Online World: An Analysis of Occupational Licensing

Chiara Farronato, Andrey Fradkin, Bradley Larsen and Erik Brynjolfsson

No 26601, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the effects of occupational licensing on consumer choices and market outcomes in a large online platform for residential home services. We exploit exogenous variation in the time at which licenses are displayed on the platform to identify the causal effects of licensing information on consumer choices. We find that the platform-verified licensing status of a professional is unimportant for consumer decisions relative to review ratings and prices. We confirm this result in an independent consumer survey. We also use variation in regulation stringency across states and occupations to measure the effects of licensing on aggregate market outcomes on the platform. Our results show that more stringent licensing regulations are associated with less competition and higher prices but not with any improvement in customer satisfaction as measured by review ratings or the propensity to use the platform again.

JEL-codes: J2 J44 K2 L15 L51 L88 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-law and nep-lma
Note: IO LE LS PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published as Chiara Farronato & Andrey Fradkin & Bradley J. Larsen & Erik Brynjolfsson, 2024. "Consumer Protection in an Online World: An Analysis of Occupational Licensing," American Economic Journal: Applied Economics, vol 16(3), pages 549-579.

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Journal Article: Consumer Protection in an Online World: An Analysis of Occupational Licensing (2024)
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