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More physicians: improved availability or induced demand?

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  • Fredrik Carlsen
  • Jostein Grytten

Abstract

A number of empirical studies have shown that there is a negative association between population:physician ratio and utilization of medical services. However, it is not clear whether this relationship reflects supplier‐inducement, the effect of lower prices on patient demand, a supply response to variation in health status, or improved availability. In Norway, patient fees and state reimbursement fees are set centrally. Therefore, the correlation between utilization and population:physician ratio either reflects supplier‐inducement, a supply response or an availability effect. We applied a theoretical model which distinguished between an inducement and an availability effect. The model was implemented on a cross‐sectional data set which contained information about patient visits and laboratory tests for all fee‐for‐service primary care physicians in Norway. Since population:physician ratio is potentially endogenous, an instrumental variable approach is used. We found no evidence for inducement either for number of visits or for provision of laboratory services. © 1998 John Wiley & Sons, Ltd.

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  • Fredrik Carlsen & Jostein Grytten, 1998. "More physicians: improved availability or induced demand?," Health Economics, John Wiley & Sons, Ltd., vol. 7(6), pages 495-508, September.
    • Handle: RePEc:wly:hlthec:v:7:y:1998:i:6:p:495-508
    DOI: 10.1002/(SICI)1099-1050(199809)7:6<495::AID-HEC368>3.0.CO;2-S
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