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Who Values Human Capitalists' Human Capital? Healthcare Spending and Physician Earnings

July 2020

Working Paper Number:

CES-20-23

Abstract

Is government guiding the invisible hand at the top of the labor market? We study this question among physicians, the most common occupation among the top one percent of income earners, and whose billings comprise one-fifth of healthcare spending. We use a novel linkage of population-wide tax records with the administrative registry of all physicians in the U.S. to study the characteristics of these high earnings, and the influence of government payments in particular. We find a major role for government on the margin, with half of direct changes to government reimbursement rates flowing directly into physicians' incomes. These policies move physicians' relative and absolute incomes more than any reasonable changes to marginal tax rates. At the same time, the overall level of physician earnings can largely be explained by labor market fundamentals of long work and training hours. Competing occupations also pay well and provide a natural lower bound for physician earnings. We conclude that government plays a major role in determining the value of physicians' human capital, but it is unrealistic to use this power to reduce healthcare spending substantially.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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economist, payroll, earnings, expenditure, revenue, workforce, salary, tax, welfare, irs, medicare, healthcare, medicaid, taxpayer, taxation

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:
Characteristics of Business Owners, National Bureau of Economic Research, Employer Identification Numbers, American Community Survey, Protected Identification Key, National Center for Health Statistics, W-2, Herfindahl Hirschman Index, Census Bureau Disclosure Review Board, Disclosure Review Board, Adjusted Gross Income

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