The Impact of Physician Supply on the Healthcare System: Evidence from Japan's New Residency Program

Health Economics, Forthcoming

31 Pages Posted: 12 Aug 2015

See all articles by Toshiaki Iizuka

Toshiaki Iizuka

University of Tokyo

Yasutora Watanabe

University of Tokyo - Graduate School of Economics

Date Written: August 7, 2015

Abstract

Using a 2004 Japanese natural experiment affecting physician supply, we study the physician labor market and its effects on hospital exits and health outcomes. Although physicians play a central role in determining the performance of a healthcare system, identifying their impacts are difficult because physician supply is endogenously determined. We circumvent the problem by exploiting an exogenous shock to physician supply created by the introduction of a new residency program – our natural experiment. Based on panel data covering all physicians in Japan, we find that the introduction of a new residency program substantially decreased the supply of physicians in some rural markets where local hospitals had relied on university hospitals for filling physician positions. We also find that physician market wages increased in the affected markets relative to less affected markets. Finally, we find that this change in physician market wages forced hospitals to exit affected markets and negatively affected patient’ health outcomes in those markets. These effects may be exacerbated by the fact that the healthcare market was rigidly price-regulated.

Keywords: physician labor market, physician wage, hospital exit, health outcome

JEL Classification: I11, I12

Suggested Citation

Iizuka, Toshiaki and Watanabe, Yasutora, The Impact of Physician Supply on the Healthcare System: Evidence from Japan's New Residency Program (August 7, 2015). Health Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2642094

Toshiaki Iizuka (Contact Author)

University of Tokyo ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

Yasutora Watanabe

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

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