As licensing requirements become more common in the U.S. workforce, they’re driving down migration between states, curbing labor market flexibility.
That’s the conclusion of a new National Bureau of Economic Research working paper, and it’s the lead item in this week’s economic research roundup. We also take a look at the family characteristics that come alongside childhood obesity, at how finance effects the economy, and at the possible savings impact of tax cuts. Check this column each week for a survey of fresh studies from academia, agencies, think tanks and Wall Street.
More licensing, less movement
Is Occupational Licensing a Barrier to Interstate Migration?
Published December 2017
Available on the National Bureau of Economic Research website
Between-state migration has fallen off a cliff in the U.S., and an uptick in occupational licensing is one culprit driving the trend, according to this working paper by the University of Minnesota’s Janna Johnson and Morris Kleiner. Between-state migration for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations, based the analysis. Even after accounting for the fact that state-licensed professionals may have clientele and network-based reasons for seeking stability, the relative migration of state-licensed occupations is 16 percent lower than for those that require a national test.
The overall effect could be significant. The increase in licensing could account for 4 percent of the decline in interstate migration between 1980 and 2010, which is significant when one considers that the aging of the U.S. population accounted for only 10 percent of the decline in that period. The effects of licensing are especially clear in the legal field, which requires bar exams. Increasing bar exam difficulty cuts both in-migration and out-migration: lawyers don’t want to take the test, and don’t want to give it up once they have. A lot of this result is driven by California, where the bar is notoriously difficult.
Households With at Least One Obese Child Differ in Several Ways From Those Without
Published Dec. 4, 2017
Available on the USDA website
Children from households where at least one sibling is obese tend to live in a more disadvantaged environment. Their parents were more likely to be unmarried, less educated, unemployed, and obese themselves, based on a U.S. Department of Agriculture Economic Research Service analysis.
The truth about finance
Evidence on finance and economic growth
Published December 2017
Available on the European Central Bank website
Finance is good for economic growth, a vast body of research shows, but recent studies suggest that its effects are not monolithic: benefits don’t arise from all types of financial activity and at all levels of financial development. “The positive effect of finance on growth dissipates beyond a threshold level of financial development,” according to a European Central Bank review of more recent literature. Why? Part of it owes to brain-drain from the real economy to the financial sector, and part to the exacerbation of fragility as finance becomes more important in an economy. It’s also the case that some types of finance, like mortgage credit, have proven less useful for sustainable economic development than, for instance, enterprise credit.
Spend or save?
U.S. Economic Weekly: To Save or Spend the Tax Cut
Published Dec. 8, 2017
Available to Bank of America subscribers
The savings rate has been falling in the U.S. over the past two years as consumers spend more on services, but Bank of America Corp. economists suggest that the trend could see a temporary turnaround if tax cuts come to fruition. Because the potential personal tax cuts are written into law as temporary, theoretical evidence suggests that they’ll lead to a tick-up in savings – if they were lasting, households might view them as a sign that they’d need less money in the future. Because they are not, the effect doesn’t hold. Theory seems to match up with evidence, in this case. Under the 2001 U.S. tax cuts, rebates seem to have increased the savings rate.