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Labour supply, service intensity, and contracts: Theory and evidence on physicians

Author

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  • Bernard Fortin

    (Département d'Economique, Université Laval - ULaval - Université Laval [Québec], CRREP - Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques - ULaval - Université Laval [Québec], CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal = University of Québec in Montréal)

  • Nicolas Jacquemet

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Bruce Shearer

    (Département d'Economique, Université Laval - ULaval - Université Laval [Québec], CRREP - Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques - ULaval - Université Laval [Québec], CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal = University of Québec in Montréal)

Abstract

Based on linked administrative and survey panel data, we analyze the labour supply behaviour of physicians who could adopt either a standard fee-for-service contract or a mixed remuneration (MR) contract. Under MR, physicians received a per diem and a reduced fee for services provided. We present estimates of a structural discrete choice model that incorporates service intensity (services provided per hour) and contract choice into a labour supply framework. We use our estimates to predict (ex ante) the effects of contracts on physician behaviour and welfare, as measured by average equivalent variations. The supply of services is reduced under a MR contract, suggesting incentives matter. Hours spent seeing patients is less sensitive to incentives than the supply of services. Our results suggest that a reform forcing all physicians to adopt the MR system would have substantially larger effects on physician behaviour than were measured under the observed reform. A pure salary (per diem) reform would sharply reduce services but would increase time spent seeing patients.

Suggested Citation

  • Bernard Fortin & Nicolas Jacquemet & Bruce Shearer, 2021. "Labour supply, service intensity, and contracts: Theory and evidence on physicians," PSE-Ecole d'économie de Paris (Postprint) hal-03426996, HAL.
  • Handle: RePEc:hal:pseptp:hal-03426996
    DOI: 10.1002/jae.2840
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    2. Damien Échevin & Bernard Fortin & Aristide Houndetoungan, 2023. "Healthcare Quality by Specialists under a Mixed Compensation System: an Empirical Analysis," CIRANO Working Papers 2023s-19, CIRANO.

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    Keywords

    Practice Patterns of Physicians; Labour Supply; Service Intensity; Fee-for-Service Contract; Mixed Remuneration Contract; Discrete Choice Models;
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