Do Occupational Regulations Increase Earnings? Evidence from China

We examine the influence of occupational certification and licensing in China. In the empirical analysis, we find that licensing is associated with an average of 15 percent higher wages and certification with a 13–14 percent higher wage based on ordinary least squares estimates. However, using propensity score and instrumental variable estimates suggests that part of the positive effect of certification on wages is due to self‐selection. In addition, the characteristics of a certificate or license, such as the type and quantity, further influence wage determination in China.