Occupational Licensing and the Wage Structure in Germany

In order to work in licensed occupations, employees need permission from the state. For Germany, it remains unanswered why occupations become licensed and how licensing affects the wage structure. The article describes the institutional embeddedness of licensing in the German labor market. These institutions create barriers to entry and regulate prices of occupational tasks. By accounting for licensing and its accompanying institutions, the article shows licensing to generate a safety net effect rather than mere monopoly rents. Wage inequality is reduced as a consequence. Results from conditional and unconditional quantile regressions based on the BIBB-BAuA Employment Survey 2012 strongly support that view.