Labor Supply Effects of Occupational Regulation: Evidence from the Nurse Licensure Compact

Abstract

There is concern that licensure requirements impede mobility of licensed professionals to areas of high demand. Nursing has not been immune to this criticism, especially in the context of perceived nurse shortages and large expected future demand. The Nurse Licensure Compact (NLC) was introduced to solve this problem by permitting registered nurses to practice across state lines without obtaining additional licensure. We exploit the staggered adoption of the NLC to examine whether a reduction in licensure-induced barriers alters the nurse labor market. Using data on over 1.8 million nurses and other health care workers we find no evidence that the labor supply or mobility of nurses increases following the adoption of the NLC, even among the residents of counties bordering other NLC states who are potentially most affected by the NLC. This suggests that nationalizing occupational licensing will not substantially reduce labor market frictions.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.