Panel Paper: Do the Effects of Occupational Licensure Vary with Time? Evidence from Registered and Practical Nurses in the US, 1950-80

Saturday, November 8, 2014 : 2:25 PM
Enchantment Ballroom E (Hyatt)

*Names in bold indicate Presenter

Mindy Marks, University of California, Riverside and Marc Law, University of Vermont
Most theories of occupational licensure posit that the impact of licensure should increase with time. Capture theorists argue that while licensing may not affect wages or participation in the short run, because incumbent workers are grandfathered, over time licensing should increase wages and reduce participation. The potentially harmful effects of licensing on under-represented groups may also grow as licensing gradually limits the participation of disadvantaged workers. The public interest theory of licensure similarly posits that the impacts of licensing may not be immediately observable. The signalling value of a license may take time to manifest itself in higher wages (especially for disadvantaged groups) and the positive effects on participation may also appear only gradually. Taking advantage of the fact that different states moved from a certification to a licensure regime at different times, we use three census waves to identify the medium term impact of licensure on wages and participation in two US nursing professions (registered and practical nurses). Our analysis uses a difference-in-difference (DD) framework to identify the impact of licensing on nurses as a whole, and a difference-in-difference-in-difference (DDD) estimator to determine the impact on under-represented workers. While we find some evidence that wages rise (weakly) with time, there is no evidence that participation declines with time. Additionally, for registered nurses, we find weak evidence that minority wages rose faster than non-minority wages, and that participation of minority workers increased with time. Taken as a whole, these findings are inconsistent with the capture theory and somewhat more consistent with the public interest theory.