Incentive pay systems have been introduced in public sectors such as education and healthcare. Inthese organisations where the outcome (health or education) is a joint product between different agents,it is unclear what the effects of these incentives are onto the behaviour of untargeted agents. We focuson patient health as a joint product of patient effort, through lifestyle and behaviour, and doctor effort,through diagnosis and treatment. Patient response to doctor effort isa prioriambiguous and dependson the degree of complementarity or substitution between doctor and patient effort. We use data on thephysical activity, drinking and smoking behaviours of over 2,000 patients aged over 50 with cardiovasculardiseases in England. Through a new data linkage and an instrumental variable approach, we test whetherchanges in doctors’ treatment efforts triggered by changes in their payment system between 2004 and2006 had an impact on patient behaviour. Doctors working in primary care practices increased theproportion of patients with controlled disease from 76% to 83% in response to the payment change.Patients responded by reducing the frequency of drinking alcohol and their cigarette consumption. Thissuggests that patient efforts are complements to doctor effort. The results have implications for theeffectiveness of pay-for-performance schemes which encourage higher doctor effort, and the design ofsuch incentive schemes.
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