Occupational regulation and labour market fluidity in ten European Countries

This paper examines the impact of occupational regulation, a labour market institution affecting many workers, on labour market fluidity in Europe. Using data from 10 European countries, we estimate the effect of occupational regulation on occupational mobility (transition to another occupation) and job loss (transition from employment to unemployment). By leveraging the variation in regulation across countries within an occupation, we identify the regulation effect using a two-way fixed effects approach. We also compare the effects of more and less stringent forms of regulation. The results show that occupational regulation substantially decreases occupational mobility, while its effect on job loss is ambiguous. More stringent regulation (occupational licensing) has a more substantial effect than weaker requirements.