RDP 2024-06: Examining the Macroeconomic Costs of Occupational Entry Regulations 6 Conclusion and further work

OER is an important regulatory tool that has important costs and benefits. This paper fills a gap in our understanding of OER by documenting their stringency across several states and occupations and assessing their costs in terms of economic dynamism.

We find evidence that OER in Australia are slightly more stringent than the average OECD country, particularly for personal services, but are significantly more stringent than the least stringent countries in the OECD. There are also differences across states, with OER tending to be more stringent in New South Wales, compared to Queensland and Victoria.

We also find evidence that OER do impose some macroeconomic costs. More stringent OER are associated with less business entry and exit, which potentially has implications for competition and therefore consumer prices. More stringent OER are also associated with slower flows of labour from low- to high-productivity firms, and therefore lower productivity growth. And finally, there is some tentative evidence that more stringent OER are associated with skill shortages.

These findings provide a useful input for regulators when assessing changes to OER. They also help us better understand the macroeconomic effects of past, or future, changes in OER. To this end, future work documenting changes in OER over time could be useful in understanding whether changes in OER contributed to the decline in economic dynamism and productivity growth observed in Australia over the 2010s.