Is Occupational Licensing a Barrier to Interstate Migration?
NBER working paper no. 24107
Authors: Janna E. Johnson and Morris M. Kleiner

The stylized fact to be explained is that interstate migration is falling. Its widely accepted that this is not a good sign for a variety of reasons. The authors look at to what extent this is as a result of state licensing requirements. The basic idea here is that as someone who is licensed in Kansas to do something, its hard to move to Arkansas because your license disappears. Using survey data, they look at who has moved and whether they were in occupations with local or national licensing regimes. The main finding is that individuals with a state-level licensing exam move at 69% the rate of those with a national level licensing requirement. Using other estimates of the import of moving for income, they find that incomes are in the ballpark of $360 million less than they would be without these restraints.

First Impression:
I like this paper. I think they’ve done a solid job of picking apart different aspects of the problem here. One fun aspect of their analysis is using ‘far’ instate movements to pick up on the bias caused by selection for people who are willing to move a long distance. This is not the only smart thing they’ve done, but its the one that caught my eye.

Potential concerns:
I think that the authors here have done nearly as good a job as possible picking apart the selection issues associated with looking at people willing to move long-distances. That said, there are still probably fundamental differences between the guys moving across the state and across the country. This is something that is touched on briefly in the lawyer case, but frankly I’m more interested in the effects on Hairdressers, teachers, and nurses anyhow. On a totally different note, its always good to remind ourselves that this is not general equilibrium. If we really did open up these markets to moving, its possible that competition becomes more intense everywhere, and so all these folks incomes drop anyhow. That is not even remotely a strike against this paper, but rather a warning to policymakers.

Why should we care:
Personally – low-interstate migration rates is incredibly important. To the extent that the US is a monetary and fiscal union, its ideal if the macro shocks that hit us hit us all. With a reasonable amount of interstate migration, if they didn’t, people would move and rebalance (albeit a bit slowly), with the effect that every part of the country is (conceptually) in a similar position. There are problems with this for sure. But there are worse problems for the US without interstate migration. Without it – half the country could be in a depression, and half in a boom time, and the Fed can’t do anything to alleviate the suffering. The States all have budget balancing requirements that force them to be pro-cyclical locally, so they couldn’t do anything. The US government might be able to, but frankly it would be difficult. High interstate migration fixes this (I should be crediting some other paper for most of this exposition, but I can’t remember it at the moment). For this reason alone, I’m quite happy to see this contribution from Johnson and Kleiner.