Abstract
We develop a model of statistical discrimination in occupational licensing with endogenous occupation selection and wage determination. We find a unique equilibrium with sharp comparative statics. Our key theoretical result is that the licensing premium is higher for workers who are members of demographic groups that face a higher cost of licensing. The predictions of the model can explain, for example, the empirical finding in the literature that occupational licenses that preclude felons close the racial wage gap among men by conferring a higher premium to Black men than to White men (Blair and Chung 2018).
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