Medical Demography and Intergenerational inequalities in GPs' earnings

This article examines the link between restrictions on the number of physicians and general practitioners' earnings. Using a representative panel of 6,016 French self-employed GPs over the years 1983 to 2004, we show that the policies aimed at manipulating the number of places in medical schools strongly affect physicians' permanent level of earnings.We estimate an earnings function to identify experience, time and cohort effects. The cohort effect is very large: the estimated gap in earnings between "good" and "bad" cohorts may reach 25%. GPs beginning during the eighties have the lowest permanent earnings: they belong to the baby-boom numerous cohorts and faced the consequences of an unlimited number of places in medical schools. Conversely, the decrease in the number of places in medical schools led to an increase in permanent earnings of GPs who began their practice in the mid nineties. A stochastic dominance analysis shows that unobserved heterogeneity does not compensate for average differences in earnings between cohorts. These findings suggest that the first years of practice are decisive for a GP. If competition between physicians is too intense at the beginning of career, she will suffer from permanently lower earnings. To conclude, our results show that the policies aimed at reducing the number of medical students succeeded in buoying up physicians' permanent earnings.