TY  - JOUR
AU  - Nicholson,Sean
AU  - Souleles,Nicholas S.
TI  - Physician Income Prediction Errors: Sources and Implications for Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8907
PY  - 2002
Y2  - April 2002
UR  - http://www.nber.org/papers/w8907
L1  - http://www.nber.org/papers/w8907.pdf
N1  - Author contact info:
Sean Nicholson
Professor
Department of Policy Analysis and Management
Cornell University
102 Martha Van Rensselaer Hall
Ithaca, NY 14853
Tel: 607/254-6498
Fax: 607/255-4071
E-Mail: sn243@cornell.edu

Nicholas S. Souleles
Finance Department
The Wharton School
2300 SH-DH
University of Pennsylvania
Philadelphia, PA  19104-6367
Tel: 215/898-9466
Fax: 215/898-6200
E-Mail: souleles@wharton.upenn.edu
AB  - Although income expectations play a central role in many economic decisions, little is known about the sources of income prediction errors and how agents respond to income shocks. This paper uses a unique panel data set to examine the accuracy of physicians' income expectations, the sources of income prediction errors, and the effect of income prediction errors on physician behavior. The data set contains direct survey measures of income expectations for medical students who graduated between 1970 and 1998, their corresponding income realizations, and a rich summary of the shocks hitting their medical practices. We find that income prediction errors were positive on average over the sample period, but varied significantly over time and cross-sectionally. We trace these results to persistent specialty-specific shocks, such as the growth of health maintenance organizations (HMOs) and other changes across health care markets. Physicians who experienced negative income shocks were more likely to respond by increasing their hours worked, allocating fewer of their work hours to teaching/research and more to patient care, and were more likely to switch specialties.
ER  -