Addressing Endogeneity in Primary Care Physician Compensation in China: Evidence from an Instrumental Variables Approach

In the vast machinery of public health, the primary care physician acts as the first line of defense, the gatekeeper who decides whether a community stays healthy or spirals into crisis. Yet, across the globe, these gatekeepers are often the hardest to find and the easiest to lose. The challenge is not merely about training enough doctors, but about understanding what keeps them in the chair. A concept known as the expected income hypothesis suggests that a doctor's behavior is driven by what they believe they should earn. If their actual paycheck falls short of this internal benchmark, they may leave, reduce their effort, or seek work elsewhere. Conversely, if their earnings meet or exceed their expectations, they are more likely to stay, providing better care and fostering trust within their community. This dynamic is not just about money; it is about the balance between the value a society places on its healers and the reality of their daily lives. When that balance tips too far toward the latter, the entire system of universal health coverage begins to strain, leaving rural and remote populations without the care they need most.

To understand how this balance plays out in one of the world's largest healthcare systems, researchers from Nanjing Medical University and its affiliated hospital turned their attention to China's primary care workforce. In August 2020, they launched a massive survey, reaching out to nearly 8,500 doctors working in community health centers, township clinics, and village practices across five provinces. The goal was to listen directly to these physicians: to ask them what they actually earned, what they felt they should earn, and what factors influenced their desire to stay in the field. The researchers were particularly interested in a tricky problem where a doctor's actual income and their expected income influence each other simultaneously, making it difficult to tell cause from effect. To untangle this, they used a statistical method that acts like a filter, isolating specific factors to see which ones truly drive a doctor's salary expectations.

The results painted a stark picture of a system under financial stress. The average primary care doctor in the study reported an actual annual income between $4,800 and $12,000, a figure that placed the majority of the workforce in the lower income brackets. However, when asked what they considered a fair annual income for their efforts, skills, and living expenses, the average expectation soared to $26,810. The most common salary range doctors hoped for was between $24,000 and $48,000, a target that would effectively double the earnings of nearly half the respondents. This gap was not uniform; it widened significantly depending on where a doctor lived. Those in the eastern, more developed regions of China had higher income expectations than their counterparts in the central and western regions. Similarly, doctors in cities expected more than those in the countryside, reflecting the higher cost of living and the different economic landscapes they navigated.

Beyond the raw numbers, the study identified four specific factors that significantly shaped these expectations: the region where the doctor worked, their level of job satisfaction, their education, and their perception of what income is needed to attract a qualified doctor. The researchers found that job satisfaction played a surprising role; doctors who were unhappy with their current work environment tended to have even higher income expectations. It seems that when the daily reality of the job feels unrewarding, the financial compensation becomes the primary lever for satisfaction. Education also mattered, with those holding higher degrees generally expecting higher pay, likely because they have invested more time and resources into their training. Perhaps most telling was the "perceived income," a measure of what doctors believed was the minimum salary required to convince a qualified medical graduate to take a primary care job. This figure averaged $31,786, a threshold that the current pay scale is far from meeting.

The study did not simply highlight a gap; it offered a clear path forward for policymakers. The researchers concluded that a one-size-fits-all approach to compensation will not work. Instead, local governments must tailor their strategies to their specific economic conditions and talent needs. In wealthier eastern cities, this might mean raising base salaries to match the high cost of living and the competitive job market. In the more remote western regions, where cash salaries might be harder to increase dramatically, the focus could shift to non-monetary benefits like housing support, career development opportunities, and community recognition. The core message is that money is a powerful tool, but it must be used with precision. By aligning compensation with the actual value of the work and the specific circumstances of the doctors, China can begin to close the gap between what its primary care physicians earn and what they believe they deserve, ensuring that the gatekeepers of public health remain where they are needed most.