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Lemons Models of Professional Labor Markets Reconsidered


  • Jaewoo Ryoo

    (Kookmin University)


This paper examines the nature of equilibrium in professional service markets where consumers are heterogeneous and practitioners are quality-differentiated. The paper first develops models for the cases in which consumers can and cannot observe the quality of any practitioner. Noting that unobservable quality is a likely characteristic of professional labor markets, the paper then compares the equilibrium outcomes in a pure lemons model with those under symmetric information. The existence of adverse selection in the equilibrium is shown to depend both on the demand structure as well as the supply structure. It is also observed that conventional lemons models are not consistent with characteristics of the professional service markets. Finally, the paper argues that the standard theory which views occupational licensure as a solution to the adverse selection problem loses much of its validity in the long run.

Suggested Citation

  • Jaewoo Ryoo, 1996. "Lemons Models of Professional Labor Markets Reconsidered," Eastern Economic Journal, Eastern Economic Association, vol. 22(3), pages 355-363, Summer.
  • Handle: RePEc:eej:eeconj:v:22:y:1996:i:3:p:355-363

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    References listed on IDEAS

    1. Wendy Naysnerski & Tom Tietenberg, 1992. "Private Enforcement of Federal Environmental Law," Land Economics, University of Wisconsin Press, vol. 68(1), pages 28-48.
    2. Douglas W. McNeil & Andrew W. Foshee & Clark R. Burbee, 1988. "Superfund Taxes and Expenditures: Regional Redistributions," The Review of Regional Studies, Southern Regional Science Association, vol. 18(1), pages 4-9, Winter.
    3. Schwert, G William, 1981. "Using Financial Data to Measure Effects of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 121-158, April.
    4. Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
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    Cited by:

    1. McGinnis, John O. & Mangas, Russell D., 2014. "An undergraduate option for legal education," International Review of Law and Economics, Elsevier, vol. 38(S), pages 117-131.
    2. Gregory Dow, 2014. "Partnership markets with adverse selection," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 105-126, June.

    More about this item


    Labor Markets; Professional Labor Markets; Professionals;

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations


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