NATIONAL BUREAU OF ECONOMIC RESEARCH
NBER Working Papers and Publications
|November 1994||Physician Financial Incentives and Cesarean Section Delivery|
with Jonathan Gruber: w4933
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...
Published: Rand Journal of Economics, Spring 1996 citation courtesy of