Dynasties in professions and the role of rents and regulation: Evidence from Italian pharmacies

Abstract

This paper provides causal evidence concerning the role of rents in explaining dynasties in professions. It focuses on the Italian pharmacist labor market, and exploits discontinuities (established by law) in the relationship between the number of pharmacies that should serve a city and the population. Using a regression discontinuity design, it shows that a reduction in rent, proxied by the pharmacy-to-population ratio, has a significant and negative impact on the propensity of pharmacists' children to follow their parents' career. In contrast, pharmacy rents do not affect the career choices of non-pharmacists' children, who face higher entry barriers (i.e. they do not inherit the family business). Further evidence shows that rents and lower exposure to competition are associated with stronger family ties also among other professions and within firms.