What Is the Objective of Professional Licensing? Identification of a Static Model of Licensing and Some Evidence from the US Market for Lawyers

According to public interest theory, professional licensing solves the lemon problem generated by asymmetric information. In contrast, capture theory claims that licensing aims at increasing professional salaries by restricting supply. This paper shows that the two theories can be identified using data from one regulated profession and provides an empirical application to the US market for lawyers. The results imply that lawyers' salaries have a large weight relative to social welfare in the objective function of licensing boards.