Inductive Effect of Physicians Number and Hospital Bed on Health Expenditures in Iran

Document Type : Research Paper


1 Associate Professor of Economics, University of Tabriz

2 Ph.D. Student in Economics, University of Tabriz


According to Roemer's Law, due to induced demand in healthcare services, increasing the number of hospital beds, and even doctors, will make healthcare expenditures increased. Applying econometric analysis of panel data of Iran provinces over the period of 2001-2010, this study tries to investigate the existence of physician-induced demand in Iran. The results indicate that a change in the number of physicians has a significant positive impact on the provinces health expenditure. Therefore the existence of induced demand in Iran is confirmed. However, the results of examining the density of hospital beds show that there is no supplier-induced demand, and an inverse relationship is observed between the variable and health expenditure. The results also show that the variables of GDP and mortality rate have significantly positive relationship with health expenditure, while the variables of education, unemployment and fertility rate are significantly and inversely correlated with provinces health expenditure. Among the variables, fertility rate does not have the predicted sign and the proportion of population over 65 years and degree of urbanization also had no significant effect on health expenditure.


  1. 1- خانی، محمد (1391). بررسی تقاضای القایی توسط پزشکان مطالعه موردی سزارین در ایران. پایان­نامه کارشناسی ارشد، دانشکده مدیریت و اقتصاد، دانشگاه صنعتی شریف.

    2- عبدلی، قهرمان (1387). تعیین کننده­های مخارج درمان در سازمان تأمین اجتماعی. رفاه اجتماعی، سال هفتم، 27، 252-235.

    3- عبدلی، قهرمان، و ورهرامی، ویدا (1390). نقش اطلاعات نامتقارن در القای تقاضا: مطالعه موردی خدمات پزشکی. مدیریت سلامت، 14 (43)، 37-42.


    1. Arrow, K. J. (1963). Uncertainty and the welfare economics of medical care. American Economics Review, 53 (5), 941-973.

    2. Crivellei, L., Filippini, M., and Mosca, I. (2006). Federalism and regional health care expenditures: an empirical analysis for the Swiss Cantons. Health Economics, 15 (5), 535–541.

    3. Delattre, E., and Dormont, B. (2003). Fixed fees and physician-induced demand: a panel study of French physicians. Health Economics, 12 (9), 741-754.

    4. Dranove, D., and Wehner, P. (1994). Physician-induced demand for childbirths. J Health Econ, 13, 61–73.

    5. Ellis, R. P., and McGuire, T. G. (1990). Optimal payment systems for health services. J Health Econ, 9, 375–396.

    6. Escare, J.J. (1993). Would eliminating differences in physician practice style reduce geographic variation in cataract surgery rates. Medical Care, 12, 1106-1118.

    7. Feldstein, M. S. (1970). The rising price of physicians’ services. Review of Economics and Statistics, 52, 121–133.

    8. Filippini, M., Masiero, G., and Moschetti, K. (2006). Socioeconomic determinants of regional differences in outpatient Antibiotic consumption: Evidence from Switzerland. Health Policy, 78 (1), 77–92.

    9. Fuchs, V. (1978). The supply of surgeons and the demand for operations. J Human Resources, 13, 35–56.

    10. Grossman, M. (1972). The demand for health: a theoretical and empirical investigation. New York: Columbia University Press for the National Bureau of Economic Research.

    11. Magazzino, C., and Mele, M. (2012). The determinants of health expenditure in italian regions. International Journal of Economics and Finance, 4 (3), 6172.
    12. McGuire, T. G. (2000). Physician Agency. Culyer A. J., Newhouse J. P., (eds).The Handbook of health economics, North-Holland: Amsterdam, 461–536.

    13. Murthy, V. N. R., and Okunade, A. A. (2009). The core determinants of health expenditure in the African context: some econometric evidence for Policy. Health Policy, 91(1), 57–62.

    14. Nassiri, A. and Rochaix, L. (2006). Revisiting physicians’ financial incentives in Quebec: a panel system approach. Health Economics, 15, 49–64.

    15. Norregaard, J. C., Bernth-Peterson, P., Alonsi, J., Dunn, E., Black, C., Anderson, T. F., Espallargues, M., Belland, L., and Anderson, G. F. (1998). Variations in indications for cataract surgery in the United States, Denmark, Canada and Spain: results from the international cataract surgery outcomes study. British Journal of Ophthalmology, 82, 1107–1111.

    16. Pauly, M. (1980). Doctors and their workshops: economic models of physician behavior. Chicago, University of Chicago Press.

    17. Rochaix, L. (1989). Information asymmetry in the market for physician’s services. J Health Econ, 8, 53–84.

    18. Roemer, M. I. (1961). Bed supply and hospital utilization: a national experiment. Hospitals, J.A.H.A., 35, 988–993.

    19. Rossiter, L. F., and Wilensky, G. R. (1983). A reexamination of the use of physician services: the role of physician induced demand. Inquiry, 20 (2), 162–172.

    20. Rossiter, L. F., and Wilensky, G. R. (1984). Identification of physician-induced demand. J Human Resources, 19, 231–244.

    21. Rossiter, L. F., and Wilensky, G. R. (1987). Health economist-induced demand for theories of physician-induced demand. Journal of Human Resources, 22(4), 624–627.

    22. Sen, Anindya (2005). Is health care a luxury? new evidence from OECD data. International Journal of Health Care Finance and Economics, 5 (2), 147-164.
    23. Seshamani, M., and Gray, A. (2004). Ageing and health-care expenditure: the red herring argument revisited. Health Economics, 13, 303-314.
    24. Shain, M., and Roemer, M. I. (1959). Hospital costs relate to the supply of beds. Modern Hospital, 92, 71–73.

    25. Stewart, J. M. (2001). The impact of health status on the duration of unemployment spells and the implications for studies of the impact of unemployment on health status. Journal of Health Economics, 20, 781–796.

    26. Suzuki, R. (1997). Medical expenditures of outpatients and the physician/population ratio. Research Report for the Research Project on Analysis of Claim Data of Medical Care for the Elderly, Foundation for Public Health Promotion.

    27. Wilinsky, A. (1993). Competition in a market for informed experts' services. RAND. J Econ, 24, 380–398.

    28. Wilensky, G. R., and Rossiter, L. F. (1981). The magnitude and determinants of physician-initiated visits in the United States. Health, Economics, and Health Economics, edited by J. van der Gaag and M. Perlman, Aspen Systems, 215–243.

    29. Wilensky, G. R. and Rossiter, L. (1983). Relative importance of physician induced demand on the demand for the medical care. Milbank Memorial Fund Quarterly, 61(2): 252–277.

    30. Zweifel, P., Felder, S., and Meiers, M. (1999). Ageing of population and health care expenditure: a red herring? Health Economics, 8, 485-496.