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Modelling nonlinearities and reference-dependence in general practitioners’ income preferences

Author

Listed:
  • Holte, J.H.
  • Sivey, P.
  • Abelsen, B.
  • Olsen, J.A.

Abstract

This paper tests for the existence of nonlinearity and reference-dependence in income preferences for general practitioners. Confirming the theory of reference dependent utility, within the context of a discrete-choice experiment, we find that losses loom larger than gains in income for Norwegian GPs, a 10% decrease in income is valued approximately equal to a 30% gain. Our results are validated by comparison with equivalent contingent valuation values for marginal willingness to pay and marginal willingness to accept compensation for changes in job characteristics. Physicians’ income preferences determine the effectiveness of ‘pay for performance’ and other incentive schemes. Our results may explain the relative ineffectiveness of financial incentive schemes that rely on increasing physicians’ incomes.

Suggested Citation

  • Holte, J.H. & Sivey, P. & Abelsen, B. & Olsen, J.A., 2014. "Modelling nonlinearities and reference-dependence in general practitioners’ income preferences," Health, Econometrics and Data Group (HEDG) Working Papers 14/12, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:14/12
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    Cited by:

    1. Holte, Jon Helgheim & Kjaer, Trine & Abelsen, Birgit & Olsen, Jan Abel, 2015. "The impact of pecuniary and non-pecuniary incentives for attracting young doctors to rural general practice," Social Science & Medicine, Elsevier, vol. 128(C), pages 1-9.

    More about this item

    Keywords

    general practitioners; income; reference-dependence; discrete choice experiment;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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