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In forming strategies to improve the macro performance of health care systems, effective interaction between the public and private service provisions is considered an important aspect of institutional design. Recent economic research has provided valuable insights into the significance of this interaction. We study the market entry decisions of private physicians in the outpatient health care sector inAustria by applying an entry=exit model at two different spatial levels of aggregation and using data from the time period 2002-2008. By estimating a Poisson panel data model with community=district fixed effects, we find a significantly negative effect of existing physician capacities in a specialty, both in the public and private sectors, on the entry of new private physicians. On the contrary, we find a significantly positive effect of existing private general practitioners on the entry of private specialists. These findings indicate that private physicians tend to (i) compensate for regional differences in public outpatient capacities, and (ii) establish cooperative networks where they collaborate with other private physicians in the local market.

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