A great example of creating a strategic barrier to entry

Here is an interesting Wall Street Journal article (download pdf here: Download License) on the growth in licensing requirements across occupations and how this has been driven by the lobbying efforts of incumbents (i.e. industry associations). Why would occupations want to be licensed? Here is the economic view (from the article)

"Occupations prefer to be licensed because they can restrict competition and obtain higher wages."

Licensing enables supporting higher prices (by making it harder for new firms to enter). A study cited in the article found that licensed workers earn, on average, 15% more than their unlicensed counterparts in other states. Clearly, it can make the industry quite attractive for incumbents

"If you go to any statehouse, you'll see a line of occupations out the door wanting to be licensed."

The clincher is that these regulations often exempt existing providers (incumbents) from being subject to these requirements (emphasis below mine).

"In Michigan, for instance, it will soon be a felony to practice massage without a license. Newcomers to the field must take 500 hours of classes and pass an exam to get that license. But a grandfather clause exempts most current massage therapists, including those who may never have taken a class at an accredited school."

Clearly, this action by Incumbents raises barriers to entry and makes the industry more attractive to them - now that is a great example of an Endogenous (or Strategic) Barrier to Entry.

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https://www.oflox.com/blog/website-design-company-in-dehradun/

[Food Ordering App]

Thanks for sharing great information's.