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The effects of pay and job satisfaction on the labour supply of hospital consultants

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  • Divine Ikenwilo

    (Health Economics Research Unit (HERU), University of Aberdeen, UK)

  • Anthony Scott

    (Melbourne Institute of Applied Economic and Social Research, University of Melbourne, Australia)

Abstract

There is little evidence about the responsiveness of doctors' labour supply to changes in pay. Given substantial increases in NHS expenditure, new national contracts for hospital doctors and general practitioners that involve increases in pay, and the gradual imposition of a ceiling on hours worked through the European Working Time Directive, knowledge of the size of labour supply elasticities is crucial in examining the effects of these major changes. This paper estimates a modified labour supply model for hospital consultants, using data from a survey of consultants in Scotland. Rigidities in wage setting within the NHS mean that the usual specification of the labour supply model is extended by the inclusion of job quality (job satisfaction) in the equation explaining the optimal number of hours worked. Generalised Method of Moments estimation is used to account for the endogeneity of both earnings and job quality. Our results confirm the importance of pay and non-pay factors on the supply of labour by consultants. The results are sensitive to the exclusion of job quality and show a slight underestimation of the uncompensated earnings elasticity (of 0.09) without controlling for the effect of job quality, and 0.12 when we controlled for job quality. Pay increases in the new contract for consultants will only result in small increases in hours worked. Small and non-significant elasticity estimates at higher quantiles in the distribution of hours suggest that any increases in hours worked are more likely for consultants who work part time. Those currently working above the median number of hours are much less responsive to changes in earnings. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1220
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 16 (2007)
Issue (Month): 12 ()
Pages: 1303-1318

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Handle: RePEc:wly:hlthec:v:16:y:2007:i:12:p:1303-1318

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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Cited by:
  1. Terence Chai Cheng & Anthony Scott & Sung-Hee Jeon & Guyonne Kalb & John Humphreys & Catherine Joyce, 2010. "What Factors Influence the Earnings of GPs and Medical Specialists in Australia? Evidence from the MABEL Survey," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2010n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Barbara Hanel & Guyonne Kalb & Anthony Scott, 2012. "Nurses' Labour Supply Elasticities: The Importance of Accounting for Extensive Margins," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2012n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  3. Cheng, T. C.; & Trivedi, P. K.;, 2014. "Attrition Bias in Panel Data: A Sheep in Wolf's Clothing? A Case Study Based on the MABEL Survey," Health, Econometrics and Data Group (HEDG) Working Papers, HEDG, c/o Department of Economics, University of York 14/04, HEDG, c/o Department of Economics, University of York.
  4. Leif Andreassen & Maria Laura Di Tommaso & Steinar Strøm, 2012. "Do Medical Doctors Respond to Economic Incentives?," CESifo Working Paper Series 3802, CESifo Group Munich.
  5. Johar, Meliyanni, 2010. "The effect of a public health card program on the supply of health care," Social Science & Medicine, Elsevier, Elsevier, vol. 70(10), pages 1527-1535, May.
  6. Olivier Chanel & Alain Paraponaris & Christèle Protière & Bruno Ventelou, 2010. "Get paid more, work more? Lessons from French physicians' labour supply responses to hypothetic fee increases," Working Papers, HAL halshs-00543971, HAL.
  7. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2012. "Quality competition with profit constraints," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 84(2), pages 642-659.
  8. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2014. "Hospital Mergers with Regulated Prices," NIPE Working Papers, NIPE - Universidade do Minho 10/2014, NIPE - Universidade do Minho.

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