Labor Market Impacts of Occupational Licensing and Delicensing : New Evidence from China

We examined the recent occupational regulation changes in China and their labor market impacts. Using data from the China Labor-Force Dynamic Survey (CLDS) from 2014 to 2018, we found an earning premium of approximately 10 percent, as well as more employment-based benefits, for those with an occupational license compared to those without one. Our data also cover the period of occupational regulation reform in China, during which 70% of occupations were delicensed. Over this period, we found, at the labor market level, the licensing status remained associated with positive earning and employment benefits premiums, but the premiums became smaller. However, among the workers whose occupations were delicensed, the positive earning and benefits premiums disappeared after the reform, relative to the never-licensed workers. We interpret such findings as licensing premiums being lost because the signal of competency is no longer valued by the employers after delicensing