Adam Chilton (Chicago; Google Scholar), Jacob Goldin (Chicago; Google Scholar), Kyle Rozema (Northwestern; Google Scholar), & Sarath Sanga (Yale; Google Scholar), Occupational Licensing and Labor Market Mobility: Evidence from the Legal Profession:
We study how state occupational licensing requirements shape labor mobility across U.S. legal markets. Drawing on newly collected data, we link variation in state bar exam waiver policies to lawyers’ license acquisitions, professional disciplinary records, and educational histories. We find that bar exam waivers increase the number of experienced lawyers obtaining a new license by 38 percent, but that the additional lawyers are subject to more professional discipline and tend to have graduated from less selective law schools. Our results suggest that state-level occupational licensing regimes can create a trade-off between the supply and quality of professionals in an industry.
Conclusion In this paper, we investigated the impact of occupational licensing requirements on the labor market mobility of lawyers and on the quality of lawyers offering legal services in a state. We specifically studied the impact of bar exam waivers for experienced lawyers on their likelihood of obtaining a license to practice law in another state and on whether the lawyers induced to move by a bar exam waiver differ in quality. To do so, we assembled novel datasets on bar exam waiver policies, license acquisitions of a sample of 1.7 million lawyers, and the professional disciplinary actions imposed on lawyers in 37 states. By exploiting more than one thousand changes in bar exam waivers between pairs of origin and destination states, we found that bar exam waivers increase labor market mobility by 38 percent. However, we also found that lawyers who are induced to obtain an additional license by a bar exam waiver are of lower quality than lawyers who would have obtained an additional license without the waiver. Taken together, these results imply that, in the legal context, occupational licensing requirements create a trade-off between the supply of labor and the quality of professionals.
Given this trade-off, future research is needed to further understand the welfare implications of occupational licensing in the legal profession. Our research specifically points toward two related topics that would benefit from additional investigation. First, because occupational licensing rules appear to impact both the quantity and quality of lawyers, future research should directly investigate the welfare implications that come from expanded access to legal services relative to potential costs associated with having a higher share of lower quality lawyers. The welfare benefits of increasing the supply of lawyers may far outweigh the costs of additional lower-quality lawyers, but more research is needed to directly explore this possibility. Second, future research should explore whether bar exam waivers create lower-quality lawyers or simply redistribute them. For instance, exam waivers may produce lower-quality lawyers if they lead to experienced lawyers not learning information that could directly improve the quality of legal services they provide; alternatively, exam waivers may simply allow existing lower-quality lawyers to expand their practices to new markets without producing any new lower quality lawyers. These two possibilities have different welfare implications and suggest different strategies for trying to protect the public.
Scott L. Cummings (UCLA), Do Bar Exam Waivers Hurt Lawyer Quality? (JOTWELL):
In Occupational Licensing and Labor Market Mobility: Evidence from the Legal Profession, Adam Chilton, Jacob Goldin, Kyle Rozema, and Sarath Sanga investigate the tradeoffs of state bar licensing requirements through the lens of bar exam waiver policies. These policies permit lawyers with a threshold level of experience to obtain a state bar license without having to sit for the bar examination, effectively “waiving in.” The authors use variation in state waiver policies as a natural experiment permitting empirical analysis of whether states allowing entry through waiver experience a decline in lawyer quality, measured in relation to metrics of lawyer discipline and law school status. The variation in policies arises because some states, like California, categorically do not permit waiver, while waiver states include those that are more restrictive (with “Reciprocity” policies requiring reciprocal waiver from the originating state) and less restrictive (with “Admission on Motion” policies permitting waiver without reciprocity).
The authors conceptualize waiver policies as creating “corridors” between states that are either closed or open and codes corridors based on waiver policies from 1983 to 2019. They examine lawyer bar admissions through these corridors based on Martindale-Hubbell directory information on the state and year in which each listed lawyer obtained license(s) (1.7 million observations through 2019). They then fold in data on lawyer quality, derived from a dataset of all lawyers for whom public discipline records are available during the relevant time frame (from a total of 37 states), added to which is information on law school attended (available for roughly 90 percent of lawyers in the dataset). The authors put in an impressive amount of work assembling these datasets and demonstrates ingenuity in using waiver policy variation to conduct the experiment.
The big empirical takeaways are interesting, important, and nuanced. …
Overall, this paper should give ample food for thought to anyone who was ever curious about bar waiver policies and their tradeoffs. It is important to know that waiver policies can potentially reduce the quality of lawyers in a jurisdiction, though how much to make of this reduction is something that requires more study. Partly, how we assess this issue will depend on what the lawyers who enter by waiver are doing and whether it makes a dent in access to justice. Perhaps, in this regard, it would be useful for states with waiver policies to impose higher pro bono requirements on lawyers who waive in to ensure that the policy has a public benefit and does not simply permit lawyers to monetized more liberal entry rules.
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