Income effects and physician labour supply: evidence from the threshold system in Ontario

In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Volume 41, Issue 4, p. 1262-1284

Abstract

Abstract.  We examine a reform to the physician threshold system in Ontario that provides a unique opportunity to assess the effect of fee changes on physician behaviour, free from the biases that potentially affect simple time‐series or cross‐section inference. We find that: (1) the income effects of fee changes are small, but significant; (2) the income effect dominates the substitution effect only for a minority of services with relatively low prices and high volumes; and (3) the cross effects of fee changes tend to be significant only for services with relatively high prices and low volumes.