Barriers to Entry or Improving Consumer Welfare: An Assessment of Occupational Regulation
Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM
- Chair: Morris M. Kleiner, University of Minnesota and NBER
Occupational Licensing and Accounting Quality: Evidence From LinkedIn
AbstractIn this paper, I examine the effects of an increase in the restrictiveness of mandatory occupational licensing on the quality of professionals. I exploit the staggered state-level adoption of an increase in the educational requirement (the 150-hour Rule) for the licensure of new Certified Public Accountants (CPAs) together with passing rates and individuals' professional histories. Using a difference-in-difference and synthetic control research design, I document that the Rule marginally increases CPA exam pass rates and reduces the candidate supply both at the state and college level, leading to an overall decline in the number of successful candidates. My analysis of LinkedIn data shows that individuals subject to the Rule are more likely to be employed at a Big 4 public accounting firm and specialize in taxation. However, Rule individuals have the same likelihood of promotion, the same duration until promotion, and exit public accounting at faster rates than their non-Rule counterparts. These findings suggest that restrictive licensing laws change the composition of the supply of new accountants, increase barriers to entry, and fail to increase the quality of CPAs.
Nurse Practitioner Labor Supply Responses to Payment Increases
AbstractThe labor supply response of medical providers to changes in compensation is an important policy parameter for estimating the effects of the Affordable Care Act (ACA) on access to care. A provision of the ACA required states to increase Medicaid primary care reimbursement rates temporarily to Medicare levels during 2013 and 2014. Aimed at increasing primary care capacity to meet demand from newly insured people, this federally-funded provision gave providers in some states significant increases in their Medicaid payments due to pre-existing variation in state Medicaid reimbursement rates. While most primary care physicians qualified for the increased payments, NPs qualified only if they practiced under the supervision of a physician. As a result, NPs providing primary care services either completely independently or in a collaborative rather than supervisory relationship with a physician could not receive higher payments.
This paper investigates the effect of the temporary payment increase on the NPs labor supply as measured by weekly hours of work. Using a difference-in-difference approach, I exploit the fact that only NPs in states with scope-of-practice laws requiring physician supervision were differentially impacted by this provision whereas physicians in all states were affected equally. My individual-level data come from the American Community Survey (ACS) over 2008-2015. I take advantage of the large ACS sample size to study potential heterogeneous effects by state based on the state’s prior ratio of Medicaid to Medicare reimbursement rates and the share of population insured by Medicaid. Preliminary results indicate that NPs who received larger increases in reimbursement rates increased total hours of work following the provision and that this change was larger in states with lower prior Medicaid reimbursement rates.
Analyzing Occupational Licensing Among the States
AbstractThe study provides new evidence of the influence of occupational regulations on the U.S. economy. Our analysis, unlike previous surveys, was able to obtain a representative sample of the population at the state level, which allowed us to estimate the cross-sectional effects of occupational licensing for each state. The results show the costs of licensure measured by economic returns on licensing regulations, simulated losses in jobs and output, and a potential misallocation of national resources at the state and national level. The national estimates suggest that occupational licensing raises wages by about 10 percent after controlling for human capital and other observable characteristics and creates potential deadweight losses in the economy that are estimated and discussed.
Licensing, De-Licensing, and the Recent Re-Licensing of Barbers in Alabama
AbstractThe economic effects of occupational licensing remains an understudied topic, but even less is known about the effects of removing licensing legislation. In this paper we take advantage of a natural experiment occurring in the state of Alabama. Alabama was the last state to begin licensing barbers in 1973 and also the only state to de-license barbers in 1983. Several efforts have been made to re-license the occupation—most recently with a bill that became law in September 2013. Relying on County Business Patterns data from 1974 to 1994 and a synthetic control design methodology we find that barber de-licensing reduced the annual earnings of barbers and the number of cosmetologist employees per million residents in Alabama. Taken together, our results suggest that licensing was restricting competition in the market for and not improving the quality of hair cutting services in Alabama.
- J4 - Particular Labor Markets
- K2 - Regulation and Business Law