Do Medical Doctors Respond to Economic Incentives?

A paper which could have been written very interestingly.

Anyways, the paper is based on a sample of Norweigan doctors from 1997-99. Hence, a limited sample. Research shows these  doctors do respond to economic incentives. Though impact is modest:

We have estimated a structural labor supply model that allows for choices between types of jobs. At each point in time, physicians can choose between 10 different states which are a combination of working full time or part time, working in hospitals or primary care, working in the public or private sector and not working. In our model, the current choice depends on all the utility functions associated with each alternative in the past, not only the optimal ones. Thus, we allow for the random parts of the utility functions to be correlated across time and types of jobs (taste persistence). This behavioural assumption implies that individuals’ past options (and not only past optimal choices) matter for current choices. The model is estimated on a panel of 6,564 married Norwegian physicians from 1997 to 1999.

Our study implies that overall wage increases and tax reductions give the medical doctors an incentive to move to full time jobs, in particular in the private sector, at the expense of working in other jobs in the health care sector of the economy. Because we allow other attributes than pure economic incentives to matter in explaining behaviour, captured by random parts in the preference structure, and because availability of jobs and restrictions on hours work vary across jobs, the overall impact on labor supply among Norwegian medical doctors of changes in economic incentives is rather modest.


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