Physician Financial Incentives and Cesarean Section Delivery

49 Pages Posted: 14 Jan 2001 Last revised: 27 Jun 2010

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Maria Owings

Government of the United States of America - National Center for Health Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: November 1994

Abstract

The 'induced demand' model states that in the face of negative income shocks physicians may exploit their agency relationship with patients by providing excessive care in order to maintain their incomes. We test this model by exploiting an exogenous change in the financial environment facing obstetrician/gynecologists during the 1970s: declining fertility in the U.S. We argue that the 13.5% fall in fertility over the 1970-1982 period increased the income pressure on ob/gyns, and led them to substitute from normal childbirth towards a more highly reimbursed alternative, cesarean delivery. Using a nationally representative micro-data set for this period, we show that there is a strong correlation between within state declines in fertility and within state increases in cesarean utilization. This correlation is robust to consideration of a variety of alternative hypotheses, and appears to be symmetric with respect to periods of fertility decline and fertility increase.

Suggested Citation

Gruber, Jonathan and Owings, Maria, Physician Financial Incentives and Cesarean Section Delivery (November 1994). NBER Working Paper No. w4933. Available at SSRN: https://ssrn.com/abstract=245846

Jonathan Gruber (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Maria Owings

Government of the United States of America - National Center for Health Statistics

Division of Data Services, CDC
Hyattsville, MD 20782-2003
United States

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