Volume 35, Number 2 (Spring) 2000
Thurston, Norman K., and Anne M. Libby. 2000. "Taxes and Physicians' Use of Ancillary Health Labor." Journal of Human Resources 35(2):259-278.
Recent papers have examined the effect of taxes on the labor supply of high income individuals and on the demand for employee labor; entrepeneurs' decisions to hire workers are seen to be quite sensitive to changes in marginal tax rates. However, little is known about the applicability of these findings to physician services. We posit a straightforward model of physician utility-maximization, where physician-employers jointly choose own work effort and labor inputs. There is no theoretical prediction about the sign or magnitude of the cross-price effects of changes in physicians' tax rates on their choice of ancillary labor inputs. We estimate the impact of taxation of physician income on both the extensive and intensive margins using state-level variation in marginal income tax rates to identify the effects. We also examine the sensitivity of total and per worker compensation to variation in marginal tax rates.
Norman Thurston is an assistant professor of economics, Brigham Young University, Provo, Utah and Anne Libby is an assistant research economist, Center for Mental Health Services Research, University of California, Berkley. The authors recognize the generosity of the Health Care Finance Administration (HCFA) in making the data available and the BYU College of Family Home and Social Sciences for funding. Proficient research assistance was provided by Martha Harrison and Laura Carter. The data used in this article are restricted and require special permission from HCFA. The authors can provide information on obtaining these permissions, and can assist in providing the data (if requested by HCFA) beginning December 2000 through December 2003. Contact Norman Thurston at 130 Faculty Office Building, Provo, Utah 84602-2363 or by e-mail at nkt@byu.edu for more information.
© 2002 by the Board of Regents of the University of Wisconsin System
US ISSN 0022-166X