Hadley and Reschovsky 2006 Godager et al. All financing decisions in health care are based, implicitly or explicitly, on underlying assumptions about the supply and demand response of the health care system. The operation of markets for medical care services has been an object of research in health economics for many years, and underlies decisions on health care system structures and financing. The study confirms the need to jointly consider supply and demand in exploring the behaviour of physician services markets. The model is validated by comparing post-panel model predictions with actual market outcomes over a period of three years and is found to provide surprisingly accurate projections over a period of significant policy change. Supply changes are therefore due to shifts in the position of the curves, partly determined by a time trend. The direct impact of GP density on demand, while significant, proves almost immaterial in the context of near vertical supply curves. The estimated price elasticity of demand of - 0.19 is comparable with other studies. The structural equations of the model are estimated separately using population-weighted fixed effects panel modelling with the two stage least squares formulation of the generalised method of moments approach (GMM (2SLS)). This study uses aggregate panel data on general practitioner (GP) services at the Statistical Local Area level in Australia spanning eight years to estimate supply and demand equations for GP services. To understand the trends in any physician services market it is necessary to understand the nature of both supply and demand, but few studies have jointly examined supply and demand in these markets.
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