Physicians' Services and the Division of Labor Across Local Markets

Abstract

This paper reports empirical evidence of systematic cross-locale variation in the degree of division of labor among physicians. A theoretical model--based on an individual producer's trade-off between increasing returns and falling marginal revenue within each activity--motivates the empirical tests. At two levels of aggregation, specialization is correlated with local demand shifters for medical services. At the individual level, I find systematic differences in the range of procedures performed within a specialty class. General practitioners working fewer hours, practicing in more populated counties, or practicing in countries with more elderly produce a narrower range of procedures.