Abstract
This paper contains a theoretical and empirical model of the physician firm. The utility maximizing physician chooses the number of hours of labor to supply and the mix between patient visits and time per visit. Theory suggests that a serious specification error may occur if one estimates the labor supply curve and patient demand curve without simultaneously estimating the mix between patient visits and time per visit. A Chi-Square specification test reveals that this “triage” model statistically dominates the simple supply/demand model. Estimation results indicate relevant backward-bending labor and negatively sloped service supply functions.
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The authors benefitted from comments and suggestions by Steven Farber, Carter Hill, William J. Moore, Robert J. Newman, Charles E. Phelps an two anonymous referees. The usual caveat applies.