Methods

To study licensing’s impact on quality, we used regressions to compare average consumer Yelp ratings for individual businesses in bordering states with different licensing schemes. More specifically, for each set of comparison states, we looked at Yelp ratings for businesses located within a certain narrow distance, or “bandwidth,” from either side of the border. 1

Because such businesses are geographically close, they should be similar, with the primary difference being that they operate under different regulatory regimes. However, to further ensure the similarity of the communities in which the businesses operate, we controlled for total population, percentage of the population with a bachelor’s degree or higher, and median household income, three variables similar studies have found to be important controls. 2 This allowed us to attribute differences in Yelp ratings to the regulatory regime as strongly as possible.

We used businesses’ Yelp ratings in our regressions because they represent a widely known and used measure of service quality. Because Yelp’s platform relies on consumer input, it harnesses the power of crowdsourcing. In addition, the five-point rating scale is an easy-to-understand measure of quality, and its quantitative nature makes it ideal for analyses like ours. Finally, past studies have shown Yelp ratings to be a valid measure of quality. 3

We chose occupations and states with widely divergent regulatory regimes to have the best chance of uncovering the relationship—if any—between licensing and quality. We compared ratings across nine sets of state pairings and six occupations. The specific occupations and states we studied, as well as the licensing requirements for each state, are presented in Table 1. 4 The ratings spanned October 2004 through October 2020 for locksmiths and October 2004 through June/July 2019 for the other five occupations. (For more details on our methodology, including the number of businesses in each comparison, see Appendix A.) 

Table 1: Licensing Requirements for States Observed in Comparisons

Occupation/StateFeesEstimated Days
Lost to Education
and Experience
ExamsMin GradeMin Age
Barber




NJ (less burdensome)$80 21021217
PA (more burdensome)$150 2922816
Cosmetologist




NY (less burdensome)$70 2332017
CT (more burdensome)$100 350190
NJ (more burdensome)$119 28021217
Interior Designer




CA (unlicensed)∗ — 
NV (licensed)$1,215 2,190100
Locksmith




PA (unlicensed) — 
NJ (licensed)$217 73211218
Manicurist




CT (unlicensed)† — 
MA (licensed)$188 23200
NY (licensed)$70 582017
Tree Trimmer




NV (unlicensed) — 
CA (licensed)$529 1,4602018
VA (unlicensed) — 
MD (licensed)$30 1,0951018
∗ Though California does not license interior designers, it does offer title protection to those who hold certification with the  California Council for Interior Design Certification. Cal. Bus. & Prof. Code §§ 5800–12.
† As of January 1, 2021, Connecticut licenses manicurists. H.B. 7424, 2019 Gen. Assemb., Reg. Sess. (Conn. 2019); Connecticut State Department of Public Health. (n.d.). Nail technician. https://portal.ct.gov/DPH/Practitioner-Licensing–Investigations/Nailtechs/Nail-Technician. However, it did not do so during our study period
Note: Any education captured in estimated days lost to education and experience is postsecondary education, or training, required for licensure. Estimated days lost does not include any minimum K–12 grade requirement for licensure.