Occupational Licensing of a Credence Good: The Regulation of Midwifery

Abstract

A general theoretical and empirical model of the impact of regulation on supply and demand (prices and quantities) is developed in this paper. The regulation of midwifery services—of certified nurse‐tnidwives (CNMs)—relative to obstetricians (OBs) is analyzed within this framework. Demand‐side (quality assurance) effects are distinguished from supply‐side (Stigler‐Peltzman) effects in the model. Since both unambiguously predict a price increase, we focus on the regulatory impact on quantity. We find, within the empirical model, that while both effects are present, supply‐restricting effects dominate quality assurance in the U.S. market for CNM services. When mean regulations are compared to minimum regulations in the sample, CNM births increase from just under 6% of all births to a little over 11%. On net, regulation reduces the quantity of CNM births.

Occupational Licensing and Accountant Quality: Evidence from the 150‐Hour Rule

“…The regulator uses licensing to maintain a minimum level of human capital, which in turn ensures a certain level of quality. 21 The imposition of licensing may, in effect, shift the quality-adjusted demand curve upward, improving consumer welfare and increasing the supply of high-quality services by ensuring the competency of practitioners (Adams, Ekelund, and Jackson [2003]).…”

Occupational Licensing and Maternal Health: Evidence from Early Midwifery Laws

“…On the other hand, theory suggests possible adverse consequences of licensure that could counteract and possibly even override the benefits to consumers from improved provider quality. Perhaps the most important among these is the possibility that licensure could lead to higher prices and reduced access to the service in question, causing consumers to substitute for cheaper, inferior alternatives (Shepard 1978;Kleiner and Kudrle 2000;Adams, Ekelund, and Jackson 2003;Kleiner et al 2016). Moreover, because licensees are insulated from competitive pressure, their incentive to provide high-quality service may be diminished, and they may even engage in behavior that strictly lowers quality.…”

The Effects of Government Licensing on E-commerce: Evidence from Alibaba

“…For ML, Law and Kim (2005) andLaw and Marks (2009) find occupational licensing improved markets when it was hard to ascertain quality of professional services or quality of workers. In contrast, Pashigian (1979) finds statespecific occupational licensing reduce the interstate mobility of professionals; Shepard (1978) finds higher price of dental services and higher dentist income in jurisdictions that do not offer reciprocity in ML; Kleiner and Kudrle (2000) find no improved dental outcomes but higher prices of basic dental services in places with stricter licensing; Adams III et al (2003) find fewer births by midwifery upon more stringent licensing; and Kleiner and Todd (2009) find mortgage broker licensing had no impact on the number of foreclosures but led to higher price of mortgages.…”