The value of occupational licensing dims in the online world

SIEPR Faculty Fellow Brad Larsen brings a twist to ongoing debates over licensing laws as his latest research shows how consumers don't care about occupational licenses amid online reviews and star ratings. Consider the last time you hired an electrician, plumber or painter. Did you care to check if they were licensed or not? If licensing status was not your priority, you are not alone, according to new research by Stanford economist Brad Larsen. Larsen's research finds that what matters more to people are customer reviews and ratings, and prices. The results suggest that occupational licensing laws - which affect nearly 30 percent of the American workforce and vary widely from state to state - could use some reevaluation. "Consumers tend to heavily value prices and online reputation, but not the licensing status of professionals when they're picking whom to hire," said Larsen, an assistant professor of economics and faculty fellow at the Stanford Institute for Economic Policy Research ( SIEPR ). "This is suggestive that we should take a much closer look at licensing laws to make sure they are working as intended, and to be sure the benefits outweigh the costs." The study - conducted jointly with Chiara Farronato of Harvard, Andrey Fradkin of Boston University and Erik Brynjolfsson of MIT - examined hundreds of job categories within the home improvement sector, using data covering more than a million service requests that consumers throughout the United States posted on an online market platform in 2015.