Informational Frictions and Practice Variation: Evidence from Physicians in Training

David C. Chan, Jr

NBER Working Paper No. 21855
Issued in January 2016, Revised in November 2016
NBER Program(s):Health Care, Health Economics, Industrial Organization, Labor Studies, Productivity, Innovation, and Entrepreneurship

Substantial practice variation across physicians for seemingly similar patients remains an unresolved puzzle. This paper studies physicians in training to explore the behavioral foundations of practice variation. A discontinuity in the formation of teams reveals a large contribution of relative experience in the size of practice variation. Among the same physician trainees, convergence towards a common practice differs by practice environment, with more convergence in specialist-driven services. Rich trainee characteristics and training histories, including the practice styles of prior supervising physicians, explain little if any variation. These findings suggest a major role for informational frictions in the origins of practice variation.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w21855