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American Economic Journal:
Applied Economics

ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)

Consumer Protection in an Online World: An Analysis of Occupational Licensing

  • Chiara Farronato
  • Andrey Fradkin
  • Bradley J. Larsen
  • Erik Brynjolfsson
American Economic Journal: Applied Economics
vol. 16, no. 3, July 2024
(pp. 549–79)
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Abstract

We study the demand and supply implications of occupational licensing using transaction-level data from a large online platform for home improvement services. We find that demand is more responsive to a professional's reviews than to the professional's platform-verified licensing status. We show some evidence that consumers view licenses and reviews as substitutes. We confirm the generality of our findings off the platform in an independent consumer survey. Combining state-level licensing regulation data with platform microdata, we find that more stringent requirements are associated with less competition, higher prices, and no increase in demand or consumer satisfaction.

Citation

Farronato, Chiara, Andrey Fradkin, Bradley J. Larsen, and Erik Brynjolfsson. 2024. "Consumer Protection in an Online World: An Analysis of Occupational Licensing." American Economic Journal: Applied Economics, 16 (3): 549–79. DOI: 10.1257/app.20210716

Additional Materials

JEL Classification

  • D18 Consumer Protection
  • J44 Professional Labor Markets; Occupational Licensing
  • L74 Construction
  • L84 Personal, Professional, and Business Services
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