Entry and regulation: evidence from health care professions

Catherine Schaumans () and Frank Verboven

RAND Journal of Economics, 2008, vol. 39, issue 4, 949-972

Abstract: In many countries, pharmacies receive high regulated markups and are protected from competition through geographic entry restrictions. We develop an empirical entry model for pharmacies and physicians with two features: entry restrictions and strategic complementarities. We find that the entry restrictions have directly reduced the number of pharmacies by more than 50%, and also indirectly reduced the number of physicians by about 7%. A removal of the entry restrictions, combined with a reduction in the regulated markups, would generate a large shift in rents to consumers, without reducing the availability of pharmacies. The public interest motivation for the current regime therefore has no empirical support.

Date: 2008
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https://doi.org/10.1111/j.1756-2171.2008.00045.x

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Working Paper: Entry and Regulation - Evidence from Health Care Professions (2006)
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