Chiara Farronato (Harvard Business School)
We study the effects of occupational licensing on consumer choices and market outcomes in a large online platform for residential home services. We exploit exogenous variation in the time at which licenses are displayed on the platform to identify the causal effects of licensing information on consumer choices. We find that consumers do not value the platform-verified licensing status of a professional, while they are heavily influenced by reviews and prices. We confirm this result in an independent consumer survey. We also use variation in regulation stringency across states and occupations to measure the effects of licensing on aggregate market outcomes on the platform. Our results show that more stringent licensing regulations are associated with less competition and higher prices, and not with any improvement in customer satisfaction as measured by review ratings and the propensity to use the platform again.