Working Papers in Economics,
University of Bergen, Department of Economics

Abstract: We test whether a demand response by patients exists in the Norwegian primary care sector. In Norway, physicians are remunerated either by salary or by incentive contract, and we have access to a large data survey that allows us to study the relationship between consumer satisfaction with primary physician services and the way physicians are paid. In addition, we can identify areas (municipalities) where market demand for primary physicians’ services is responsive to effort. When a demand response exists, we expect that patients’ benefit is higher and that patients are more satisfied when visiting a contract physician. As expected, we find very small effects of the salary physician density on reported patient satisfaction in municipalities where market demand is nonresponsive to physicians’ choice of effort. In municipalities with responsive market demand, we find a negative association between salary physician density and patients’ satisfaction with their physician.

Keywords: Physician behavior; Remuneration contracts; Patients’ satisfaction

JEL-codes: I11; M52

28 pages, March 6, 2006

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