For the past 35 years, the literature has presented two theories behind the use of mandatory licensure
for professionals: (a) public interest theory and (b) capture theory (also known as acquired theory; Pagliero, 2005; Stigler, 1971).
In this paper we use data from American states to examine the consequences of the move from certification to mandatory licensure for two occupations.
This investigation is important because we believe ours to be among the few studies that examine the effects of a shift to mandatory licensure in an environment where government certification is already in place.
Since different states made the switch to mandatory licensure at different times, we can take advantage of this variation to estimate the effects of mandatory licensure relative to certification.
Second, large and small states are represented among states that switched to mandatory licensure as well as among states that that did not alter their regulatory regime.
For each nursing profession we display summary statistics separately for nurses in states that switched from certification to mandatory licensure ("treatment" states) and for nurses in states that did not adopt licensure ("control" states) during the subsequent decade.
However, in terms of years of schooling, age, sex, race, and number of children, there are no major differences among nurses in treatment and control states, which further buttresses our belief that the switch from certification to mandatory licensure may constitute a valid quasi-experiment.
It appears that the switch from certification to mandatory licensure had at most a very small positive effect on participation in the registered nursing profession.
To control for these factors in our analysis of the effects of mandatory licensure on wages, we estimated the following regression equation separately for each nursing profession:
Accordingly, it is the regression-adjusted DID estimate of the effects of mandatory licensure relative to certification on wages.