Do Occupational Licenses Increase Wages and Wage Inequality?

For licensed occupations practitioners need permission from the state to pursue their work. For Germany it is an open question why some occupations are licensed and how licensing affects the wage structure. This article describes how deeply embedded within legal institutions licensing in the German labor market is and points out that it creates barriers to entry and regulates the prices of occupational tasks. The article comes to the conclusion that the economic consequences of licensing can be better understood as a safety net effect rather than a purely monopolistic advantage and that it translates into a reduction of wage inequality. Results from conditional and unconditional quantile regressions based on the BIBB-BAuA Employment Survey 2012 strongly support this view.