Labor Supply Effects of Occupational Regulation: Evidence from the Nurse Licensure Compact

Abstract

There is concern that licensure requirements impede mobility of licensed professionals to areas of high demand. Nursing has not been immune to this criticism, especially in the context of perceived nurse shortages and large expected future demand. The Nurse Licensure Compact (NLC) was introduced to solve this problem by permitting registered nurses to practice across state lines without obtaining additional licensure. We exploit the staggered adoption of the NLC to examine whether a reduction in licensure-induced barriers alters the nurse labor market. Using data on over 1.8 million nurses and other health care workers we find no evidence that the labor supply or mobility of nurses increases following the adoption of the NLC, even among the residents of counties bordering other NLC states who are potentially most affected by the NLC. This suggests that nationalizing occupational licensing will not substantially reduce labor market frictions.

Labor Market Effects of Spatial Licensing Requirements: Evidence from CPA Mobility

“…In contrast, we focus on a profession providing highly tradable services for which geographic barriers may impose greater costs. As such, our findings complement those of DePasquale and Stange [2016] and suggest that licensing‐induced geographic costs are especially relevant when services are highly tradable (Crino [2010], Criscuolo and Garicano [2010]).…”

“…Geographic barriers are believed to be one of the most severe costs imposed by occupational licensing regulations (e.g., Kleiner [2000]), yet no compelling empirical evidence supports this claim. DePasquale and Stange [2016] investigate the impact of such restrictions on the labor market for nurse practitioners and find no evidence of wage effects, suggesting that the potential costs of geographic barriers are not severe. However, their results may hinge on the low tradability of healthcare services that naturally require face‐to‐face provision (Crino [2010]).…”

Medical Labour Supply and the Production of Healthcare

“…This illustrates the importance of factors other than pay, such as workplace composition, affecting behaviour. DePasquale and Stange () look at the effect of reducing regulation on the accreditation of foreign workers. They exploit the staggered adoption of the Nurse Licensure Compact (NLC), which made it easier for qualified nurses to practise in a different state to the one in which they qualified.…”

What Explains the Rising Share of US Men in Registered Nursing?

“…Nursing is a licensed occupation in every state, hence it is reasonable to ask whether differences or changes in licensing requirements might play a role in a man’s decision to become an RN. DePasquale and Stange (2016) suggested that differences across states in licensing requirements for nurses in the period of our study are small and largely stable. Such requirements are therefore absorbed by state fixed effects in our models.…”