Analyzing Occupational Licensing Across Nations

Relatively little is known about occupational licensing across nations. Current estimates generally place occupational licensing coverage in many advanced economies, including the United States and many European countries, at roughly 20–25 percent of the workforce. Governments typically justify licensing as a means of protecting consumers and ensuring quality by mandating minimum qualifications for practitioners. However, licensing erects barriers that can restrict labor supply and worker mobility, with potentially far-reaching implications for wages, employment opportunities, and economic efficiency.

Our research investigates how the prevalence of occupational licensing varies across nations, focusing on regions that have previously lacked data on licensing. Currently, much of what is known about licensing comes from studies conducted in the United States and other advanced economies. National surveys in the United States and Europe have only recently begun to include questions about whether workers hold a required license. In contrast, scant data exist on occupational licensing in developing regions, including large parts of Africa, Asia, and South America. Closing this knowledge gap is important: If licensing is prevalent in developing economies, it could shape labor market outcomes in ways similar to—or even more pronounced than—those observed in more developed economies, thereby affecting worker mobility, job access, and economic growth.

Our research provides the most comprehensive global analysis of occupational licensing rates to date. We collected new survey evidence between 2023 and 2026 on licensing in countries where such data were previously unavailable, including Argentina, India, Mexico, and South Africa. We then compared these findings with existing data from the United States and European countries. Across 44 countries, our findings reveal that occupational licensing is pervasive in modern labor markets. The typical country in our study licenses roughly 25 percent of its workforce, but there is substantial variation, ranging from 14 percent in Denmark to 42.5 percent in India.

Several developing and middle-income economies have licensing rates that are as high as, or higher than, those observed in the United States and European countries. For example, Chile, India, the Philippines, and South Africa rank among the most heavily licensed labor markets in our study. These findings challenge the common assumption that occupational licensing is primarily a feature of wealthy, advanced economies. Instead, it appears to be a widespread labor market institution spanning countries with diverse legal systems, income levels, and regulatory traditions.

Additionally, occupational licensing correlates with broader measures of economic and institutional performance. Countries with higher licensing rates tend to have lower output per person, larger informal sectors, and lower scores on multiple dimensions of governance quality, including regulatory quality, rule of law, political stability, and control of corruption. While our findings do not establish that occupational licensing caused these relationships, they suggest that it may often function as part of a broader regulatory environment characterized by greater barriers to formal economic participation, rather than as an isolated labor market institution.

Our research also finds that licensed workers earn, on average, approximately 6–19 percent higher wages than comparable unlicensed workers. However, the consequences of occupational licensing may operate differently across countries and institutions. In contexts where licensing raises barriers to entry but does not generate large wage premiums, its principal effects may instead include reduced labor market access, diminished worker mobility, higher consumer prices, and the expansion of informal employment. This final possibility may be particularly important in developing economies, where workers can more readily enter informal employment and the distinction between formal and informal labor markets often plays a central role in economic organization.

Several limitations of our analysis are worth noting. While our surveys are nationally representative, they focus on the formal sector, and the enforcement of licensing requirements may vary across countries and occupations. As a result, our estimates capture licensing among workers who self-report holding required credentials, rather than the full intended scope of regulation. Future research should explore the gap between licensing requirements and enforcement, particularly in countries with large informal sectors.

The correlations documented in our study are consistent with several possible explanations. One possibility is that occupational licensing directly impedes economic performance by raising barriers to entry, reducing labor mobility, and incentivizing some workers to operate in the informal sector. A second possibility is reverse causality: Countries with lower income levels, weaker governance institutions, or larger informal sectors may adopt additional licensing requirements in an effort to improve quality, increase compliance, or formalize economic activity. A third possibility is that occupational licensing, informality, governance quality, and economic development are all jointly determined by deeper institutional characteristics that shape the degree of government involvement in labor markets, such as state capacity, regulatory traditions, and political incentives. Distinguishing among these explanations remains an important task for future research.

More broadly, our research highlights the need for improved international data on occupational regulation. The absence of comparable evidence across countries has likely led researchers and policymakers to understate the global prevalence of occupational licensing and its effects on labor markets and economic development. Extending similar surveys to additional countries and tracking responses over time would enable future research to better understand how licensing affects informality, migration, worker mobility, and long-run growth across different institutions. Such findings would help policymakers determine the optimal level of regulation for each nation.

Note:
This research brief is based on Jonathan S. Hartley and Morris M. Kleiner, “Analyzing Occupational Licensing Across Nations,” National Bureau of Economic Research Working Paper no. 35424, July 2026.