Liberalizing Professional Services: Evidence from Italian Lawyers
This paper presents a new model of occupational licensing, where producers are heterogeneous both in their ability or productivity and in the level of the barriers to entry in the profession that they face. The model bears important implications on the effects of liberalization policies that differ dramatically from those implied by the standard model, where heterogeneity is unidimensional in productivity. Specifically, we find that liberalization policies induce higher quality of services if barriers to entry are high for the most able agents. The opposite if such a correlation is low. We test these implications using detailed microdata on Italian lawyers and find a strong effect of the 2006 Italian liberalizing reform on the composition of the outflows from the legal profession. While higher ability lawyers are more likely to leave the profession before the reform, the opposite happens in its aftermaths, consistently with the idea that monopoly power selects high-productivity lawyers out of the profession.
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- Mario Pagliero, 2010. "Licensing Exam Difficulty and Entry Salaries in the US Market for Lawyers," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 726-739, December.
- Pagliero, Mario, 2011. "What is the objective of professional licensing? Evidence from the US market for lawyers," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 473-483, July.
- Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
- 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.
- Tanya Wanchek, 2009. "Dental Hygiene Regulation and Access to Care," Working Papers 2009-02, Center for Economic and Policy Studies, revised 23 Jul 2009.
- Edward Timmons & Robert Thornton, 2008. "The Effects of Licensing on the Wages of Radiologic Technologists," Journal of Labor Research, Springer, vol. 29(4), pages 333-346, December.
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