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.
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. 2
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. 3 The ratings span the period from October 2004 through October 2020 for locksmiths and from October 2004 through June/July 2019 for the other five occupations, although not all businesses may have had ratings in every year of those time spans. (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
Lost to Education
|Exams||Min Grade||Min Age|
|NJ (less burdensome)||$80||210||2||12||17|
|PA (more burdensome)||$150||292||2||8||16|
|NY (less burdensome)||$70||233||2||0||17|
|CT (more burdensome)||$100||350||1||9||0|
|NJ (more burdensome)||$119||280||2||12||17|
† 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.