Occupational Licensing and Psychologist Supply

Does reducing interstate licensing barriers increase the supply of mental health providers? We study this question using the U.S. Psychology Interjurisdictional Compact (PSYPACT), which allows psychologists to practice across state lines via telemedicine without obtaining additional state licenses. Because interstate telemedicine entry is difficult to track using physical practice locations, we utilize data from a large mental health provider search platform, where providers choose which zipcodes they are listed in as search results. Leveraging states' staggered accession timings for identification, we find a nuanced supply response: although joining PSYPACT increases listings in a state by 7.7% within a year, the response is entirely driven by incumbent psychologists within a state listing for the first time. We find evidence consistent with incumbents responding to a perceived threat of entry, as states with ex ante high licensing costs exhibit the largest treatment effects, and incumbents choose to list in underserved, high-income areas within those states.