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Measuring Physicians' Response to Incentives: Evidence on Hours Worked and Multitasking

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  • Shearer, Bruce S.

    () (Université Laval)

  • Somé, Nibene Habib

    () (University of Western Ontario)

  • Fortin, Bernard

    () (Université Laval)

Abstract

We measure the response of physicians to monetary incentives using matched administrative and time-use data on specialists from Québec (Canada). These physicians were paid fee-for-service contracts and supplied a number of different services. Our sample covers a period during which the Québec government changed the prices paid for clinical services. We apply these data to a multitasking model of physician labour supply, measuring two distinct responses. The first is the labour-supply response of physicians to broad-based fee increases. The second is the response to changes in the relative prices of individual services. Our results confirm that physicians respond to incentives in predictable ways. The own-price substitution effects of a relative price change are both economically and statistically significant. Income effects are present, but are overridden when prices are increased for individual services. They are more prominent in the presence of broad-based fee increases. In such cases, the income effect empirically dominates the substitution effect, which leads physicians to reduce their supply of clinical services.

Suggested Citation

  • Shearer, Bruce S. & Somé, Nibene Habib & Fortin, Bernard, 2018. "Measuring Physicians' Response to Incentives: Evidence on Hours Worked and Multitasking," IZA Discussion Papers 11565, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11565
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    References listed on IDEAS

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    1. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    2. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
    5. Jasmin Kantarevic & Boris Kralj & Darrel Weinkauf, 2008. "Income effects and physician labour supply: evidence from the threshold system in Ontario," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1262-1284, November.
    6. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, January.
    7. Zabalza, Antoni, 1983. "The CES Utility Function, Non-Linear Budget Constraints and Labour Supply: Results on Female Participation and Hours," Economic Journal, Royal Economic Society, vol. 93(37), pages 312-330, June.
    8. Bernard Fortin & Nicolas Jacquemet & Bruce Shearer, 2019. "Labour Supply, Service Intensity and Contract Choice: Theory and Evidence on Physicians," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02158484, HAL.
    9. Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
    10. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, vol. 10(4), pages 385-410.
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    Cited by:

    1. Nibene H. Somé & Rose Anne Devlin & Nirav Mehta & Gregory S. Zaric & Sisira Sarma, 2020. "Stirring the pot: Switching from blended fee‐for‐service to blended capitation models of physician remuneration," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1435-1455, November.
    2. Somé, N.H. & Devlin, R.A. & Mehta, N. & Zaric, G.S. & Sarma, S., 2020. "Team-based primary care practice and physician's services: Evidence from Family Health Teams in Ontario, Canada," Social Science & Medicine, Elsevier, vol. 264(C).

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    More about this item

    Keywords

    physician labour supply; multitasking; incentive pay;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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