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Kauffman Study – Occupational Licensing For Entrepreneurs Can Can Stall Economic Growth


High rates of new business creation are the sign of a dynamic economy in which barriers to entrepreneurship are low. Business regulations, licensing fees, and regular renewal fees are barriers for start-ups. According to a new study prepared by the Kauffman Foundation, increasing licensing regulations in certain professions have the effect of building barriers to innovations and opening new businesses.

Licensing most often originates at the state level, but municipal governments and the federal government also engage in this form of regulation. Differences in state licensing requirements can make it difficult for entrepreneurs and workers to find opportunities and jobs, creating stale labor markets and underemployment.

The study states that nearly 29 percent of jobs now require a license, which is an increase from 40 years ago when just 10 percent were licensed. These requirements lead to a decreased supply of practitioners and reduce competition.

The study also looks at different forms of occupational regulation, highlights the requirements to obtain a license, and offers recommendations to reduce barriers to entrepreneurship.

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SOURCE: Kauffman Foundation

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