Organization of Dental Care Industry

This research examines the organization of the dental care industry in two different aspects: the competition among dental care providers at practice level and the dentist earnings at individual level. Chapter one uses the American Dental Association Survey of Dental Practice (SDP) data in 1981-2011 to estimate the degree of market power in the private dental practice, how it has changed over time, and the extent of any economies of scale in the provision of dental services. Both specifications of flexible cost functions - the generalized Leontief and the translog cost functions - show that the dentist services market is monopolistic competitive while the hygienist services market is close to perfectly competitive. Private dental practice shows significant economies of scale and demand for dental services are inelastic. Chapter two explores the gender difference in dentist earnings. Previous research found an unexplained gap when accounted for age, experience, working hours, parental status, region and race. Using national data of the Survey of Dental Practice from 1982 to 2012, the census data and the American Community Survey data, I add specialty, entrepreneurship, productivity, and practice size to the explanatory factors for more complete specification. The Oaxaca-Blinder decomposition finds the earnings gap in the SDP data reducing from 74% in 1982-1986 to 31% in 2007-2011, with the decrease in the explaining role of observable characteristics from 40% to 4% and the unexplained part contributing to 23%-29% of the differential. The census data shows a larger earnings gap, which could be explained by the lower percentage of female dentists as practice owners as compared to the SDP data. Race, marital status, and parental status are unobservable in the SDP analysis, but the census analysis shows that these factors only explain for 4-6% of the earnings difference. Thus, if all factors are combined in an analysis, I expect an unexplained earnings difference of about 20% which remains relatively unchanged over time. The semiparametric DiNardo-Fortin-Lemieux approach finds that the observable characteristics have stronger effect on the gap for dentists with lower earnings; while for those at higher earnings distribution, the unexplained gap is large and consistent.