Competitive Occupational Licensure: Doctors Versus Chiroporactors

• In Event: Occupational Licensing: Barriers, Competition, and Equity in the Modern Labor Market

Abstract

This paper provides the first analysis of competitive occupational licensure, where substitute professions maintain separate licensing boards that set entry requirements strategically. I develop a model where professional organizations choose licensing stringency to maximize industry profits while accounting for competitive responses, as workers with heterogeneous abilities select occupations based on expected returns and consumers observe only average quality within each profession. Testing this theory using historical competition between medical doctors (MDs) and chiropractors (DCs) from 1907-1960, I exploit digitized American Medical Association records and state-by-year variation in chiropractic board adoption to show that medical boards responded strategically by increasing college requirements by 10 percentage points, mandating internships (10+ percentage points), and reducing pass rates by 5 percentage points. These regulatory changes generated substantial economic effects: doctors experienced 26% higher home values while their numbers declined by 17-40 practitioners per 100,000 population, and chiropractors saw 44% higher home values with increased market presence. The evidence demonstrates that licensing policy cannot be evaluated in isolation when competitive responses reshape entire markets.

Author

• John Fallon, Boston University
  Presenting Author