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Physician Income Prediction Errors: Sources and Implications for Behavior

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  • Sean Nicholson
  • Nicholas S. Souleles

Abstract

Although income expectations play a central role in many economic decisions, little is known about the sources of income prediction errors and how agents respond to income shocks. This paper uses a unique panel data set to examine the accuracy of physicians' income expectations, the sources of income prediction errors, and the effect of income prediction errors on physician behavior. The data set contains direct survey measures of income expectations for medical students who graduated between 1970 and 1998, their corresponding income realizations, and a rich summary of the shocks hitting their medical practices. We find that income prediction errors were positive on average over the sample period, but varied significantly over time and cross-sectionally. We trace these results to persistent specialty-specific shocks, such as the growth of health maintenance organizations (HMOs) and other changes across health care markets. Physicians who experienced negative income shocks were more likely to respond by increasing their hours worked, allocating fewer of their work hours to teaching/research and more to patient care, and were more likely to switch specialties.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8907.

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Date of creation: Apr 2002
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Handle: RePEc:nbr:nberwo:8907

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References

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  1. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
  2. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations of the Returns to Schooling," NBER Working Papers 4936, National Bureau of Economic Research, Inc.
  3. Sean Nicholson & Nicholas S. Souleles, 2001. "Physician Income Expectations and Specialty Choice," NBER Working Papers 8536, National Bureau of Economic Research, Inc.
  4. Nicholas S. Souleles, 2001. "Consumer Sentiment: Its Rationality and Usefulness in Forecasting Expenditure - Evidence from the Michigan Micro Data," NBER Working Papers 8410, National Bureau of Economic Research, Inc.
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  8. Sean Nicholson, 2003. "Barriers to Entering Medical Specialties," NBER Working Papers 9649, National Bureau of Economic Research, Inc.
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  14. Polsky, Daniel & Kletke, Phillip R. & Wozniak, Gregory D. & Escarce, Jose J., 2000. "HMO penetration and the geographic mobility of practicing physicians," Journal of Health Economics, Elsevier, vol. 19(5), pages 793-809, September.
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Cited by:
  1. Anupa Bir & Karen Eggleston, 2003. "Physician Dual Practice: Access Enhancement or Demand Inducement?," Discussion Papers Series, Department of Economics, Tufts University 0311, Department of Economics, Tufts University.
  2. Sean Nicholson, 2004. "How Much Do Medical Students Know About Physician Income?," NBER Working Papers 10542, National Bureau of Economic Research, Inc.

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