Occupational Licensing—Between Professional Closure and Labour Market Integration

Research question/goal: 

In many European countries, immigrants are not well integrated into the labour market. Barriers to entry, for example through occupational licenses, might even further complicate the professional integration of immigrants. Our project analyses how job entry restrictions affect professional careers in general and the career prospects of immigrants in particular. In this context, we study a reform of the German Trade and Crafts Code (Handwerksordnung) that came into effect in 2004. The reform reduced the number of trades in which a master craftsmen’s diploma was a prerequisite for setting up a business from 94 to 41. In the other 53 trades, a master craftsmen’s diploma is optional. For the analysis, we will use a difference-in-difference combined with a propensity score matching estimation to compare the development of careers and incomes in trades that were liberalized in 2004 to similar trades in which entry barriers remained in place even after 2004.

Current stage: 

In the first stage, we examined the effect of opportunity expansion on immigrant self-employment. Using micro-census data and a difference-in-differences approach, we found that occupational deregulation (2004 German crafts reform) increased the self-employment probability of male immigrants with more host country-specific capital. We also found that self-employed women with more occupation-specific human capital increased their earnings, and immigrant women married to co-ethnic partners are less likely be solo self-employed after deregulation. These three studies will be submitted to scientific journals. In the second stage, we examine the effect of occupational deregulation on firms’ occupational diversification, using longitudinal firm-level data.

Fact sheet

Funding: 
DFG
Duration: 
2014 to 2022
Status: 
ongoing
Data Sources: 
IAB and Microcensus data, additional sources
Geographic Space: 
Germany

Publications