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: 

Data preparation is complete and further causal analyses in the form of Difference-in-Differences and Propensity Score Matching estimators have been carried out. The results indicate that the 2004 reform has significantly increased self-employment among recently arrived immigrant craftsmen and -women. Furthermore, individuals working in one of the liberalized occupations earn roughly 9 per cent more than Master craftsmen in regulated occupations after the reform. Our team is currently revising the paper manuscripts and submitting them to social science journals. We are continuing this research by analysing how and to what extent the demand side—firms—seize the opportunities offered by labour market liberalization.

Fact sheet

Fritz Thyssen Foundation, DFG
2014 to 2021
Data Sources: 
IAB and Microcensus data, additional sources
Geographic Space: