Abstract
Occupational licensing laws can allow professionals to extract rents in the marketplace. In the case of vision services, optometrists have the authority to write prescriptions for contact lenses. Optometrists may choose to conceal this information and force patients to purchase lenses from the professional writing the prescription—resulting in vendor lock-in. In this paper, we investigate the possible effect of the 2004 Fairness to Contact Lens Consumers Act (FCLCA) on the market for vision services by examining state differences in prescription release mandates before 2004. We find that requiring professionals to release prescription information to patients resulted in a 13% reduction in the wages of optometrists. Our results provide some evidence that the FCLCA may have increased consumer welfare by reducing the prices of contact lenses or increasing access to contact lenses.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Explore related subjects
Discover the latest articles, news and stories from top researchers in related subjects.Notes
The FTC’s website has a sample of advocacy filings related to occupational licensing https://www.ftc.gov/policy/advocacy/economic-liberty/selected-advocacy-relating-occupational-licensing.
In our sample, there were no changes to licensing requirements for opticians or optometrists. State fixed effects capture changes in these regulatory variables.
For more information on the eyeglasses rule, see the Federal Trade Commission website: https://www.ftc.gov/news-events/press-releases/2004/10/contact-lens-rule-16-cfr-part-315-and-eyeglass-rule-16-cfr-part.
Verification of the prescription can be achieved through direct communication with the prescriber. This verification must occur within 8 h. The direct communication can be done via fax, e-mail, or a phone call.
The sample is slightly larger when restricted to respondents with nonzero weeks and hours worked for the purposes of the regressions estimating hours worked.
Ideally, we would be able to test for differences in the effect for states granting prescription release and then the effect of the federal law, but data limitations prevented us from examining this difference.
References
10 Ways to Keep RXs from Walking. Review of Optometry, pp. 59–64 (September 1994).
Adams, Frank, Jackson, John, & Ekelund, Robert. (2002). Occupational licensing in a ‘competitive’ labor market: The case of cosmetology. Journal of Labor Research,23(2), 261–278.
Baker, A., & Smith, A. (2017). Regulatory protectionism in the contact lens market. R Street Policy Study No. 80, pp. 1–6.
Bond, R., Kwoka, J., Phelan, O., & Whitten, I. (1980). Effects of restrictions of advertising and commercial practice in the professions: the case of optometry. Washington, DC: Federal Trade Commission (September).
Bowman, Ward S., Jr. (1957). Tying arrangements and the leverage problem. Yale Law Journal,67, 19–36.
Chevalier, Judith A., & Morton, F. M. S. (2008). State casket sales restrictions: A pointless undertaking? Journal of Law and Economics,51(1), 1–23.
Clayton-Jeter, H. D. (2010). Looking good: Safe use and care of contact lenses. FDA News for Health Professionals, May, pp. 1–3.
Coon, J. (2006). Hearing before the Subcommittee on Commerce, Trade and Consumer Protection of the House Energy & Commerce Committee. Retrieved February 5, 2020 from https://www.govinfo.gov/content/pkg/CHRG-109hhrg31465/pdf/CHRG-109hhrg31465.pdf.
Cooper, James C. (2007). Public versus private restraints on the online distribution of contact lenses: A distinction with a difference. Journal of Law, Economics, and Policy,3, 331–364.
Cooper, J. C. (2012). Does prohibiting ‘lock-in’ improve aftermarket outcomes? Evidence from the fairness to contact lens consumers act. September 11, 2012. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2145540.
de Rugy, V. (2016). A clear-eyed view of the contact lens debate. Creators Syndicate, April 14.
Federal Trade Commission. (2004). Possible anticompetitive barriers to e-commerce: Contact lenses. Retrieved February 5, 2020 from https://www.ftc.gov/sites/default/files/documents/advocacy_documents/possible-anticompetitive-barriers-e-commerce-contact-lenses-report-staff-ftc/040329clreportfinal.pdf.
Federman, Maya, Harrington, David, & Krynski, Kathy. (2006). The impact of state licensing regulations on low skilled immigrants: The case of Vietnamese manicurists. American Economic Review, Papers and Proceedings,96(2), 237–241.
Feldman, Roger, & Begun, James. (1978). The effects of advertising: Lessons from optometry. Journal of Human Resources,13, 247–262.
Hamermesh, Daniel S., & Trejo, Stephen J. (2000). The demand for hours of labor: Direct evidence from California. Review of Economics and Statistics,82(1), 38–47.
Harrington, D. (2003). Breathing life into the funeral market. Regulation,26, 14–18.
Harrington, D. (2007). Preserving funeral markets with ready-to-embalm laws. The Journal of Economic Perspectives,21(4), 201–216.
Kellogg, Ryan, & Wolff, Hendrick. (2008). Daylight time and energy? Evidence from an Australian experiment. Journal of Environmental Economics and Management,56(3), 207–220.
Klein, W. (2006). Hearing before the Subcommittee on Commerce, Trade and Consumer Protection of the House Energy & Commerce Committee. Retrieved February 5, 2020 from https://www.govinfo.gov/content/pkg/CHRG-109hhrg31465/pdf/CHRG-109hhrg31465.pdf.
Kleiner, Morris. (2006). Licensing occupations: Ensuring quality or restricting competition. Kalamazoo, MI: Upjohn Institute.
Mincer, J. (1958). Investment in human capital and personal income distribution. Journal of Political Economy,66(4), 281–302.
Review of Optometric Business. (2013). Challenges and opportunities in the future of independent optometry. Retrieved March 15, 2015 from http://reviewob.com/data/sites/1/paa_visionsource__0413.pdf.
Ruggles, S., Genadek, K., Goeken, R., Grover, J., & Sobek, M. (2017). Integrated public use microdata series: Version 7.0 [dataset]. Minneapolis: University of Minnesota.
Shapiro, Carl. (1995). Aftermarkets and consumer welfare: Making sense of Kodak. Antitrust Law Journal,63, 483–511.
Smith, R. (1961). The incredible electrical conspiracy. Fortune, May, 22.
Sutter, Daniel. (2007). Casket sales restrictions and the funeral market. Journal of Law, Economics, and Policy,3(2), 219–240.
The White House: Department of Treasury, the Council of Economic Advisors, and the Department of Labor. (2015). Occupational licensing: a framework for policymakers.
Thornton, Robert, & Timmons, Edward J. (2013). Licensing one of the world’s oldest professions: Massage. Journal of Law and Economics,56(2), 371–388.
Thornton, R., & Timmons, E. J. (2015). The delicensing of occupations in the US. Monthly Labor Review, May, pp. 1–20.
Timmons, Edward, & Mills, Anna. (2018). Bringing the effects of occupational licensing into focus: Optician licensing in the United States. Eastern Economic Journal,44(1), 69–83.
Timmons, Edward, & Thornton, Robert. (2008). The effects of licensing on the wages of radiologic technologists. Journal of Labor Research,29(4), 333–346.
Timmons, Edward, & Thornton, Robert. (2010). The licensing of barbers in the USA. British Journal of Industrial Relations,48(4), 740–757.
Timmons, Edward, & Thornton, Robert. (2019). There and back again: The de-licensing and re-licensing of barbers in Alabama. British Journal of Industrial Relations,57(4), 764–790.
Wooldridge, J. (2007). What’s new in econometrics? Lecture 10 difference-in-differences estimation. NBER Summer Institute Lectures. Retrieved February 5, 2020 from http://users.nber.org/WNE/Slides7-31-07/slides_10_diffindiffs.pdf.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Norris, C., Timmons, E.J. Restoring vision to consumers and competition to the marketplace: analyzing the effects of required prescription release. J Regul Econ 57, 1–19 (2020). https://doi.org/10.1007/s11149-020-09399-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11149-020-09399-9