| This work explores the role of entry constraints in the physician labor market. The work first presents data on the responsiveness of physician entry to changes in relative earnings. A stable relationship between pre-medical students, an estimate of competitive or unconstrained physician entry, and physician relative earnings is exhibited. Alternatively, an unstable relationship between medical school graduates and relative earnings exists. The analysis points towards the importance of entry constraints in driving physician labor market outcomes and of government intervention in offsetting entry constraints. Next, a model of occupational choice adopted by previous authors is presented, but with the role of entry barriers introduced and emphasized. The model is estimated and annual measures of the entry constraints and taste shifts (supply shifts) are imputed. Again, distortions appear to exist in the physician labor market, as the measured constraint to medical entry increased considerably since 1929. Though the constraint level has fluctuated greatly over the post 1929 period, the empirical results imply that constraint (and thus rent) dissipation is overwhelmingly reliant upon taste shifts and government influenced changes in entry, and not voluntary medical school expansion or admission adjustments. Given an unresponsive reaction of physician entry to increased financial incentives, demand shifts can be a much more significant long term determinant of physician earnings compared to other labor markets where competitive entry responses work to dissipate short term rents. Government intervention has shown to be an important and effective means of offsetting constraints in an effort to help the physician labor market better mimic a competitive labor market. |
