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Where are all the Physicans? Private vs. Public Health Care


  • Brekke, K.R.
  • Sorgard, L.


The purpose of this paper is to examine the interplay between public and private health care. We consider a situation where public and private health care are perfect substitutes, and the government sets the wage in the public sector and the subsidy to (or taxation on) the private sector. Each physician decides how much to work in each of the sectors, and earns revenues from wage income in the public sector and patients'payments in the private sector. We find that the scope for public health care is limited if each physician does not have a genuine interest in working in the public health sector. Competition between physicians triggers a shift in production from public to private health care, and an increase in total production. The production is higher in the public sector and lower in the private sector than in the first best outcome. The endogenous nature of labour supply may have counter-intuitive effects. For example, a cost reduction in private sector may lead to a higher wage in the public sector.

Suggested Citation

  • Brekke, K.R. & Sorgard, L., 2000. "Where are all the Physicans? Private vs. Public Health Care," Norway; Department of Economics, University of Bergen 1800, Department of Economics, University of Bergen.
  • Handle: RePEc:fth:bereco:1800

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    Cited by:

    1. Hoel, Michael & Saether, Erik Magnus, 2003. "Public health care with waiting time: the role of supplementary private health care," Journal of Health Economics, Elsevier, vol. 22(4), pages 599-616, July.
    2. Midttun, Linda, 2007. "Private or public? An empirical analysis of the importance of work values for work sector choice among Norwegian medical specialists," Social Science & Medicine, Elsevier, vol. 64(6), pages 1265-1277, March.

    More about this item



    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


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