Does Occupational Licensing Reduce Job Loss During Recessions?

Licensed workers could be shielded from unemployment during recession since occupational licensing laws are asymmetric--making unlicensed workers an illegal substitute for licensed workers but not the reverse. We test our hypothesis using a difference-in-differences event study research design that exploits cross-state variation in licensing laws to compare the unemployment rate between licensed and unlicensed workers before and after the COVID-19 recession and the Great Recession. Controlling for worker ability, we find that licensing shields workers from a recession-induced increase in the unemployment rate of 0.82 p.p. during COVID-19 and 1.11 p.p. during the Great Recession