The combination of occupational regulation at the local market level and labor mobility across local markets is common. We empirically study a labor market in which a district-specific entry examination is coupled with labor mobility across districts. The analysis exploits a change in the rules for grading entry examinations, which were first graded locally and then randomly assigned to a different district. We document that regulation leads to 1) extreme heterogeneity across markets in admission outcomes, 2) unfair (discriminatory) admission procedures, and 3) inefficient mobility of workers. The impact of the reform on exam outcomes and grading standards is consistent with strategic interaction between local licensing boards.