Does Occupational Licensing Improve Product Quality? Evidence From the Airline Industry

Abstract

H.R. 5900, which was passed by Congress in July 2010, legislated more restrictive pilot rest requirements and increased the number of pilot training hours required to obtain an airline transport pilot license. This paper examines the effect that raising the occupational licensing standards have had on airline service quality. A priori, the effect is ambiguous since putting in place more restrictive licensing requirements reduces the available pool of replacement pilots and may cause airline pilots to behave opportunistically and put forth less effort, which suggests a detriment to on-time performance. On the other hand, well-rested and more experienced pilots may provide enhanced productivity leading to improved on-time performance. Our event study analysis surrounding the effective date of H.R. 5900 (August 2013) shows an improvement in traditional delays due to more effective pilots, but extended delays were exacerbated by binding work schedule restrictions.