Why is regulation introduced in the health sector? A look at occupational licensure

Economic theories suggest that the introduction of regulation can be analyzed in terms of the magnitude and distribution of its economic impact. This article uses this approach to consider the introduction of licensure in the health sector for clinical laboratory personnel. At the micro level, there is no evidence of active consumer support for licensure and it seems to have been introduced mainly at the behest of members of the occupation and bureaucrats involved in the regulation of laboratories. Bureaucrats appear to have acted largely on their own initiative and are the single most important group involved in the introduction of licensure. The large role of the occupation supports a "producer protection" model of licensure over a "consumer protection" model. But the independent role of bureaucrats suggests that actors in the public sector are also a major interest group who need to be included in any model of regulation. Their motives are complex, but in the past one of the attractions of licensure seems to have been low direct administrative costs, despite large indirect costs to consumers. At the macro level, recent changes in social policy, which may reflect broad class interests, have shifted these indirect costs increasingly to the public sector through programs like Medicare. These changes in the distribution of costs may explain a growing concern by bureaucrats about the efficiency of licensure and a shift away from this type of regulation.