Date of Completion

Spring 5-6-2012

Thesis Advisor(s)

Rexford E. Santerre

Disciplines

Health and Medical Administration

Abstract

Physicians may contribute to economic growth in two distinct, opposite ways. On the one hand, an efficient number of physicians may keep people healthy, which raises the productivity of laborers and allows them to return to work quickly after an illness. This type of profit-seeking behavior by physicians should raise the growth of the economy. On the other hand, too many physicians may exist in a market area, which leads to supplier-induced demand (SID). The SID may keep laborers out of work for longer periods and thereby negatively impact the growth of the economy. Moreover, the extra number of physicians may come at the expense of other types of occupations. Either way, the rent-seeking behavior of physicians should lead to slower economic growth. Which type of physician behavior dominates is an empirical question, so this thesis explores econometrically the impact that physicians have on economic growth.

This thesis tests a model of gross domestic product (GDP) growth using all fifty states in the United States and data from 14 different 3-year periods from 1973-2009. The main independent variable of interest is the number of physicians per 100,000 residents of each state, and the data are analyzed to determine if that number is positively or negatively correlated with state GDP growth while controlling for other determinants of economic growth. The analysis allows us to determine if our society is currently operating with too many or too few physicians. For most states and time periods, the empirical analysis suggests that physicians helped to quicken economic growth. For a few state-year observations, however, physicians led to slower growth at the margin, as the states were operating with too many physicians per 100,000 residents.