The health care professions in Europe have been subject to substantial entry and conduct regulation. Most notably, pharmacies have frequently received high regulated markups over wholesale costs, and have been protected from additional competition through geographic entry restrictions. We develop an entry model to study the direct impact of the regulations on the pharmacies, and the indirect impact on the physicians who provide related services. We study the case of Belgium, which is representative for many other countries with geographic entry restrictions. We find that the entry decisions of pharmacies and physicians are strategic complements. Furthermore, the entry restrictions have directly reduced the number of pharmacies by more than 50%, and indirectly reduced the number of physicians by about 7%. A policy analysis shows that a removal of the entry restrictions, combined with a large reduction in the regulated markups (by between 10-18%, down from the current 28%) would lead to a large shift in rent to consumers, without reducing the geographic coverage of pharmacies throughout the country. These findings show that the public interest motivation for the current regime has no empirical support. Our findings are also relevant in light of the renewed attention by competition authorities to liberalize professional regulation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
5482.
Find related papers by JEL classification: I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
"The Regulation Of Entry,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(1), pages 1-37, February.
[Downloadable!] (restricted)
Other versions:
Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000.
"The Regulation of Entry,"
NBER Working Papers
7892, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"The Regulation of Entry,"
Working Paper Series
rwp01-015, Harvard University, John F. Kennedy School of Government.
[Downloadable!]