Working Paper: NBER ID: w14502
Authors: Pascal Courty; Gerald R. Marschke
Abstract: We model the sorting of medical students across medical occupations and identify a mechanism that explains the possibility of differential productivity across occupations. The model combines moral hazard and matching of physicians and occupations with pre-matching investments. In equilibrium assortative matching takes place; more able physicians join occupations less exposed to moral hazard risk, face more powerful performance incentives, and are more productive. Under-consumption of health services relative to the first best allocation increases with occupational (moral hazard) risk. Occupations with risk above a given threshold are not viable. The model offers an explanation for the persistence of distortions in the mix of health care services offered the differential impact of malpractice risk across occupations, and the recent growth in medical specialization.
Keywords: No keywords provided
JEL Codes: D82; I10; J31; J33; L23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| more able physicians (I11) | join occupations less exposed to moral hazard risk (J28) |
| join occupations less exposed to moral hazard risk (J28) | stronger performance incentives (J33) |
| stronger performance incentives (J33) | higher productivity (O49) |
| inefficiencies in allocation of physicians (I11) | increase with level of occupational risk (J28) |
| high moral hazard risk (G52) | fail to emerge in equilibrium (D59) |
| lower-risk occupations (J28) | better clinical outcomes (I11) |
| growth in medical specialization (I11) | explained by differential exposure to moral hazard (G52) |
| decrease in moral hazard risk (G52) | increase attractiveness of specialties (J44) |
| accurate performance assessment (C52) | attract better physicians (J44) |
| introduction of performance measurement and financial incentives (J33) | exacerbate relative shortage of talent in high-risk occupations (J44) |