Physician Income Prediction Errors: Sources and Implications for Behavior

47 Pages Posted: 25 Apr 2002

See all articles by Sean Nicholson

Sean Nicholson

Cornell University - Department of Policy Analysis & Management (PAM); National Bureau of Economic Research (NBER)

Nicholas S. Souleles

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: April 2002

Abstract

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.

JEL Classification: J24, J3, J44, I11, D84

Suggested Citation

Nicholson, Sean and Souleles, Nicholas S., Physician Income Prediction Errors: Sources and Implications for Behavior (April 2002). Available at SSRN: https://ssrn.com/abstract=309596

Sean Nicholson

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States
607-254-6498 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nicholas S. Souleles (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-9466 (Phone)
215-898-6200 (Fax)

HOME PAGE: http://finance.wharton.upenn.edu/~souleles

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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