Target income and its determinants for general physicians: An instrumental variables approach

ABSTRACT

The economic behavior of physicians has a considerable effect on healthcare expenditure. A well-known theory for explaining physicians’ behavior is the target income hypothesis. In this theory, the main issue is concerned with how physicians set their desired income. Therefore, in this study the level and determinants of Iranian general practitioners’ (GPs’) desired income were analyzed. Respondents consisted of 666 GPs. We used instrumental variables (IV) as predictors of actual income in order to address endogeneity and possible measurement error in it. The monthly mean (standard deviation) of target income and the actual income of Iranian GPs were 4877.4 (3445.7) and 2188 (1768.9) USD. The actual income was the most important determinant of target income. GPs with higher economic expectations, as well as GPs dissatisfied with their current professional financial status, and GPs that had a greater willingness to save money set higher target incomes in order to respond to these expectations, to compensate their financial dissatisfaction, and to address the economic instability and financial risk of their practice. Focusing on financial incentives only in the short term can change their behavior, however in the long term, policies related to controlling desired income with focus on views factors can be helpful.

KEYWORDS:

• General practitioners
• behavioral economics
• healthcare economics and organizations
• target income hypothesis
• instrumental variables approach

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Mohsen Bayati is an assistant professor in the School of Management & Information Sciences, Shiraz University of Medical Sciences, Shiraz, Iran. He has a PhD in health economics from the Tehran University of Medical Sciences. Bayati has conducted several studies in health economics area. His research interests include health econometrics, human resources for health, inequality and SDH.

Arash Rashidian was appointed as Director, Information, Evidence and Research, effective from 14 May 2015. He also worked as Professor and the Deputy Chancellor for Public Health and Primary Care, Tehran University of Medical Sciences. He has a PhD from the University of York and a research fellowship at the London School of Hygiene and Tropical Medicine. His main interests are evidence-based health policy, health systems reform and financing and changing professionals' behaviour.