Real Returns to Medical Education

Previous estimates of the profitability of investment in medical training contain an upward bias. These studies treat as the return to such investment the full difference in trained and untrained earnings, and thus they fail to account for expected labor/leisure substitutions associated with training investments. When this bias is eliminated, rents on medical training reported in these studies disappear. These findings fail to support the popular belief that the medical profession restrains entry by limiting medical school capacity. The paper suggests other ways in which the profession may be exploiting its monopoly power which go undetected in such profitability tests.