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On the Sorting of Physicians across Medical Occupations

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Author Info
Courty, Pascal () (European University Institute)
Marschke, Gerald () (Harvard University)

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Abstract

We model the sorting of medical students across medical occupations and identify a mechanism that explains the possibility of differential productivity across occupations. The model combines moral hazard and matching of physicians and occupations with pre-matching investments. In equilibrium assortative matching takes place; more able physicians join occupations less exposed to moral hazard risk, face more powerful performance incentives, and are more productive. Under-consumption of health services relative to the first best allocation increases with occupational (moral hazard) risk. Occupations with risk above a given threshold are not viable. The model offers an explanation for the persistence of distortions in the mix of health care services offered, the differential impact of malpractice risk across occupations, and the recent growth in medical specialization.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3862.

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Length: 38 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3862

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Related research
Keywords: performance measurement; moral hazard; incentives; matching; pre-matching investment; career choice; medical specialization;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
I10 - Health, Education, and Welfare - - Health - - - General
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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  2. AlvinE. Roth, 2008. "What Have We Learned from Market Design?," Economic Journal, Royal Economic Society, vol. 118(527), pages 285-310, 03. [Downloadable!] (restricted)
    Other versions:
  3. Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September. [Downloadable!] (restricted)
  4. Leffler, Keith B, 1978. "Physician Licensure: Competition and Monopoly in American Medicine," Journal of Law & Economics, University of Chicago Press, vol. 21(1), pages 165-86, April.
  5. Martin Gaynor & Paul Gertler, 1995. "Moral Hazard and Risk Spreading in Partnerships," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 591-613, Winter. [Downloadable!] (restricted)
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  6. Michael Peters & Aloysius Siow, 2000. "Competing Pre-marital Investments," Working Papers peters-00-01, University of Toronto, Department of Economics. [Downloadable!]
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  7. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier. [Downloadable!] (restricted)
  8. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June. [Downloadable!]
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  9. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September. [Downloadable!] (restricted)
  10. Sean Nicholson, 2002. "Physician Specialty Choice under Uncertainty," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 816-847, October. [Downloadable!]
  11. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June. [Downloadable!] (restricted)
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  12. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  13. Thornton, James, 2000. "Physician Choice of Medical Specialty: Do Economic Incentives Matter?," Applied Economics, Taylor and Francis Journals, vol. 32(11), pages 1419-28, September. [Downloadable!] (restricted)
  14. Konstantinos Serfes, 2008. "Endogenous matching in a market with heterogeneous principals and agents," International Journal of Game Theory, Springer, vol. 36(3), pages 587-619, March. [Downloadable!] (restricted)
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