Impact of private practice of public health workers on public health provision: Evidence from a natural experiment

Abstract

This paper analyzes the effects of private practice on public health provision in Indonesia among doctor heads of primary public health clinics known as puskesmas. We exploit the exogenous variation in the initiation of private practice after the 1997 Ministry of Health regulation 916 that mandated health professionals to apply for a license for private practice after at least three years of compulsory public service after graduation. Instrumental variable estimates, built around this threshold experience of 3 years after 1997 regulation, suggest that dual practitioners (relative to those only engaged in puskesmas) work significantly fewer hours per week at their public posts at the puskesmas but see significantly more public patients. These observed effects become more pronounced when the private practice is held away from the puskesmas.