Occupational licensing of a credence good: The regulation of midwifrey

A general theoretical and empirical model of the impact of regulation on supply and demand (prices and quantities) is developed in this paper. The regulation of midwifery services - of certified nurse-midwives (CNM) - relative to obstetricians (OB) is analyzed within this framework. Demand-side (quality assurance) effects are distinguished from supply-side (Stigler-Peltzman) effects in the model. Since both unambiguously predict a price increase, the regulatory impact on quantity is focused upon. It is found, within the empirical model, that while both effects are present, supply-restricting effects dominate quality assurance in the US market for CNM services. When mean regulations are compared to minimum regulations in the sample, CNM births increase from just under 6% of all births to a little over 11%. On net, regulation reduces the quantity of CNM births.