Does regulation affect economic outcomes? The case of dentistry

This study examines the role of variations in occupational licensing polici es in improving the quality of services provided to consumers and the effec t of restrictive regulations on the prices of certain services and on the e arnings of practitioners. Theory suggests that more restrictive licensing m ay raise prices and at the same time raise demand by reducing uncertainty a bout the quality of the services. This article uses unique data on the dent al health of incoming Air Force personnel to analyze empirically the effect s of varying licensing stringency among the states. It finds that tougher l icensing does not improve outcomes, but it does raise prices for consumers and the earnings of practitioners. These results cast doubt on the principa l public interest argument in favor of more stringent state licensing pract ices.