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Private Versus Public Health Care in a National Health Service


  • Brekke, Kurt R

    (University of Bergen)

  • Lars Sorgard


This paper study the interplay between private and public health care in a National Health Service. We consider a two-stage game, where at stage one a Health Authority sets the public sector wage and a subsidy to (or tax on) private provision. At stage two physicians decide how much to work in the public and the private sector. We characterise different equilibria depending on the Health Authority's objectives, the physicians' job preferences, and the cost efficiency of private relative to public provision of health care. We find that the scope for a mixed health care system is limited when physicians are indifferent between working in the public and private sector. Competition between physicians triggers a shift from public provision towards private provision, and an increase in the total amount of health care provided. The endogenous nature of labour supply may have counter-intuitive effects. For example, a cost reduction in the private sector is followed by a higher wage in the public sector.

Suggested Citation

  • Brekke, Kurt R & Lars Sorgard, 2003. "Private Versus Public Health Care in a National Health Service," Royal Economic Society Annual Conference 2003 29, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:29

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    health care; mixed oligopooly; physicians;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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