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: 

Initial data preparation of both data sources was completed and primary causal analyses in the form of difference-in-differences and propensity score matching estimators were carried out. The difference-in-differences results indicate that the relative self-employment probability among the liberalized occupations has neither increased nor decreased since the reform. The results from propensity score matching show that the income of master craftsmen has increased following the reform. Our team is currently refining these analyses and drafting paper manuscripts for submission to social science journals.

Fact sheet

Fritz Thyssen Foundation
2014 to 2018
Data Sources: 
IAB and Microcensus data, additional sources
Geographic Space: