Abstract
The Induced Demand Hypothesis: an Economic Assessment by Lise Rochaix and Stéphane Jacobzone In health economics the induced demand hypothesis is bringing about a transformation in the way health-care demand is perceived. It posits that health-care demand does not simply reflect choice in terms of patient utility but can also be determined by a doctor's implicit motivation. This extremely polemical hypothesis has formed the basis for numerous empirical studies. In this paper we demonstrate that the controversy arises partly from the exact formulation of the hypothesis. A detailed analysis of available work on the extent of induced demand leads to a qualified judgement. On the empirical level, the academic debate seems to be partly closed, although it has not been definitively resolved given the limitations of the tools. Nevertheless, this economic assessment underlines the weight of the incentives to which doctors are exposed in the practice of their profession. This is not without an effect on discussion of payment systems for providers and may shed light on certain economic policy choices.
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