Labour Supply, Service Intensity and Contract Choice: Theory and Evidence on Physicians
Abstract
We develop and estimate a structural model that incorporates service intensity and endogenous
contract choice into the standard labour supply framework. We apply our model to data
collected on specialist physicians working in Quebec (Canada). These physicians are typically
paid a fee-for-service (FFS) contract. Our panel data set covers a period of policy reform which
allowed physicians either to remain on FFS or to adopt a mixed remuneration (MR) contract,
under which they receive a per diem as well as a reduced FFS. We estimate the preference
parameters of physicians governing the choice of contract and their hours worked and services
provided. We use our estimates to simulate labour supply elasticities, to predict (ex ante) the
effects of contracts on physician behaviour, and to evaluate selection effects. The supply of
services is reduced under a MR contract, suggesting incentives matter. The 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 had substantially larger effects
on physician behaviour than were measured under the observed reform.
Origin | Publisher files allowed on an open archive |
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