Matching Markets in Medical Residencies
http://economics.mit.edu/files/12537
This paper studies a particular case of matching markets in the medical field: matching medical students with residencies in rural areas. Typically, medical students prefer not to complete their residencies and begin practices in rural areas; while 1/5 of Americans live in rural areas, only 1/10 of doctors practice there. The purpose of this paper was to explore ways to increase the number of medical students who chose residencies in rural areas.
The first strategy to increase the number of medical students in rural residencies was to provide financial incentives to the students. It was found that the average resident was willing to take a salary cut of approximately $8,000 to participate in an urban program as opposed to a rural one. Greater monetary incentives were found to not actually increase the number of residents choosing rural areas, but instead they increased the quality of residents in these areas, as residents who were close to indifferent between a rural and urban program would choose rural, while residents who more strongly preferred urban programs would be left with an open spot in an urban program.
This strategy shows a potential increase in the overall social welfare of medical residents. If spots in urban locations were vacated by residents who were indifferent and chose a rural area based on the incentives, then there would be an increase in social welfare as the urban spot was filled by a resident that assigned a greater valuation to attending an urban program. If there were no rural incentives, then the urban spot may have been occupied by someone that valued that spot less.
The second strategy implemented to increase the number of rural residents was to increase the number of available positions in rural areas, decrease the number of available positions in urban areas, or a combination of the two. This strategy did result in an increase in a number of rural residents, and at the same time, the quality of the rural residents did not decrease. This was due to a re-sorting of residents to positions that best suited them.
This strategy results in a natural maximization of the social welfare. If residents are free to choose the program that best suites their needs and desires because there is less of a limit on the number of residents in each program, then more individuals’ valuations would be maximized, and therefore the overall social welfare would increase as well.