The Efficiency of Occupational Licensing during the Gilded and Progressive Eras: Evidence from Judicial Review

Abstract

This paper proposes a novel approach to assessing the efficiency and distributional consequences of occupational licensing statutes during the Gilded and Progressive eras, based on the practice of judicial review. At the time, state judges ruling on the constitutionality of police powers regulation operated under powerful legal norms that militated against redistribution and class legislation. Evidence presented in the paper strongly suggests that judges were significantly more likely to uphold, on constitutional grounds, occupational licensing legislation for occupations with important information asymmetries, suggesting that constitutional review promoted efficiency in occupational markets. These findings have implications for current policies regarding occupational licensing.