Working Paper: NBER ID: w16560
Authors: Morris M. Kleiner; Kyoung Won Park
Abstract: Occupational licensing is among the fastest-growing labor market institutions in the U.S. economy. One of the key features of occupational licensing is that the law determines who gets to do the work. In those cases where universally licensed occupations are both complements to and substitutes for one another in providing a service, the government determines who can do the tasks that are required for the consumer. In this study, we examine dentists and dental hygienists, who are both universally licensed and provide complementary services to patients, but may also be substitutes as service providers. We focus on the labor market implications of governmental requirements on permissible tasks and the supervision of hygienists' activities by dentists. Since there are elements of monopsony in the market we examine, we use the model as a guide for our analysis. We find that states that allow hygienists to be self-employed have about 10 percent higher earnings, and that dentists in those states have lower earnings and slower employment growth. Several sensitivity and falsification tests using other regulated and partially regulated occupations show that our licensing measures are generally robust to alternative specifications. Our estimates are consistent with the view that winning the policy and legal battle in the legislature and courts on the independence of work rules matters in the labor market for these occupations.
Keywords: occupational licensing; labor market outcomes; dentists; dental hygienists; regulatory environment
JEL Codes: D02; D45; H75; I11; I18; I28; J08; J18; J31; J38; J42; J44; J58; J8; K2; K31; L1; L38; L51; L98
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| States allowing dental hygienists to be self-employed (L84) | Increase in their earnings (J31) |
| Ability of hygienists to work without direct supervision from dentists (I11) | Positive effect on their employment growth (J68) |
| States allowing dental hygienists to be self-employed (L84) | Positive effect on their employment growth (J68) |
| Regulatory conditions allowing hygienists to operate independently (L84) | Decrease in hourly earnings of dentists (J39) |
| Regulatory conditions allowing hygienists to operate independently (L84) | Reduction in employment growth of dentists (J23) |