Essays in health and labor economics: Market size and supply of doctors with implication for mortality

In this study, I look at interaction between market size and doctors' choices of specialization. First, I develop a model applied to the different groups of physicians by specialization and see how their supply changes with the market size. The model, which is based on a simple random utility model, predicts that the probability of an agent choosing a specialty and location pair increases as the market size for that specialty increases. The testable implications of the model are checked using variation in the age-structure of the population over time and across locations as an instrument and this shows that the implications largely hold in the data. According to my estimations, a unit percentage point change in the probability of arrival changes the number of doctors by almost twenty-five percents which suggests the elasticity of response to supply to be around one.;Second, I evaluate the impacts of Medicare policy. I look at the problem from two angles. First, I look at whether there was a change in the rate by which doctors specialized in different fields within the medical industry because of Medicare. I have found from a simple difference-in-difference method that specialties which are more elderly prone, number of doctors normalized by population almost doubled while in other fields such trends are absent. I augment this finding by other empirical methods such as relative growth for different specialties and with year specific impact of Medicare by pre-policy coverage for the aged population as an instrument. Second, I look at the change in the outcomes in terms of changes in the mortality rates and survival rates by sexes and different age groups. I find that mortality rates fell for age groups who were exposed to the policy. I also put a dollar value to this benefit. According to my calculations, there was only a modest welfare gain from Medicare. I put a dollar value to this benefit which suggests it added almost sixty-five billion dollars for men over 65 years of age in the first ten years of Medicare. No such change was found for women.