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The Effects of Allowing Professional Incorporation on Physician Labour Supply

Strobel, S.; Kanter-Eivin, D.; Son, H.; Steiner, A.

2025-03-14 health economics
10.1101/2025.03.14.25323936 medRxiv
Show abstract

We study how tax deferral policies shape labour supply decisions over the lifecycle. Between 1975 and 2005, Canadian provinces allowed physicians to incorporate, providing high-income professionals with substantial tax deferral opportunities. Using a difference-in-differences identification strategy, we find that incorporation reduced work effort by facilitating earlier retirement. Physician supply fell by 6.8% over the long run, with especially large declines among older physicians and high-earning surgical specialists. These results provide long-run evidence of how these tax deferral policies, designed to affect high-skill labour, can alter timing of retirement and reduce labour supply.

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