published in: Journal of Labor Economics, 2005, 23 (3), 437-466
Re-licensing requirements for professionals that move across borders are widespread. In this
paper, we measure the returns to an occupational license using novel data on Soviet trained
physicians that immigrated to Israel. An immigrant re-training assignment rule used by the
Israel Ministry of Health provides an exogenous source of variation in re-licensing outcomes.
Instrumental variables and quantile treatment effects estimates of the returns to an
occupational license indicate excess wages due to occupational entry restrictions and
negative selection into licensing status. We develop a model of optimal license acquisition
which suggests that the wages of high-skilled immigrant physicians in the nonphysician
sector outweigh the lower direct costs that these immigrants face in acquiring a medical
license. Licensing thus leads to lower average quality of service. However, the positive
earnings effect of entry restrictions far outweighs the lower practitioner quality earnings effect
that licensing induces.
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