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The Impact of Potential Labor Supply on Licensing Exam Difficulty in the US Market for Lawyers

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  • Mario Pagliero

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Abstract

This paper provides the first empirical evidence of a positive impact of the quality and number of potential entrants on entry requirements in professional markets. The estimated effects are so large that increases in the quality of candidates are completely offset by increases in exam difficulty and therefore do not lead to any long run increase in the number of successful candidates. Variations in the number of candidates are also significantly (but not completely) offset by changes in exam difficulty. About one third of the additional candidates that otherwise would have passed the examination fail because of the increase in standards. These results are not in line with public interest theory of licensing. The classic rent seeking view of licensing can explain some (but not all) of the results.

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File URL: http://www.child-centre.unito.it/papers/child19_2008.pdf
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Bibliographic Info

Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp19_08.

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Length: 52 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:wpc:wplist:wp19_08

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Keywords: professional licensing; legal market; bar exam; minimum standards; entry regulation;

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References

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  1. Catherine Schaumans & Frank Verboven, 2008. "Entry and regulation: evidence from health care professions," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 949-972.
  2. Pashigian, B Peter, 1977. "The Market for Lawyers: The Determinants of the Demand for and Supply of Lawyers," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 53-85, April.
  3. Law, Marc T. & Kim, Sukkoo, 2005. "Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation," The Journal of Economic History, Cambridge University Press, vol. 65(03), pages 723-756, September.
  4. Morris M. Kleiner, 2006. "Licensing Occupations: Ensuring Quality or Restricting Competition?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lo, December.
  5. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  6. Shepard, Lawrence, 1978. "Licensing Restrictions and the Cost of Dental Care," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 187-201, April.
  7. Shapiro, Carl, 1986. "Investment, Moral Hazard, and Occupational Licensing," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 843-62, October.
  8. Shaked, Avner & Sutton, John, 1981. "The Self-Regulating Profession," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 217-34, April.
  9. Pashigian, B Peter, 1979. "Occupational Licensing and the Interstate Mobility of Professionals," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 1-25, April.
  10. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
  11. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  12. Haas-Wilson, Deborah, 1986. "The Effect of Commercial Practice Restrictions: The Case of Optometry," Journal of Law and Economics, University of Chicago Press, vol. 29(1), pages 165-86, April.
  13. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  14. Maurizi, Alex, 1974. "Occupational Licensing and the Public Interest," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 399-413, Part I, M.
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Cited by:
  1. Paul Oyer & Scott Schaefer, 2012. "Firm/Employee Matching: An Industry Study of American Lawyers," NBER Working Papers 18620, National Bureau of Economic Research, Inc.

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