Managing Dual Practice of Health Workers: Evidence from Indonesia

Managing dual practice of health workers has often proved to be challenging, especiallyin emerging countries characterized by weak monitoring and low motivation. This paperexploits an exogenous variation in the initiation of private practice among heads of localpublic facilities (known as puskesmas) providing primary health care after the introductionof a 1997 health regulation in Indonesia. This regulation required health professionals toapply for a license for private practice at least three years after their graduation. Exploitingthe exogenous variation in private practice after the 1997 regulation, we provide estimatesof causal effects of dual practice on provision of public health services, distinguishingbetween the effects when private practice is located at or away from the public hospital.The estimates suggest that dual practitioners (relative to those engaged in public serviceonly) work significantly less hours per week while they see significantly more patients intheir public facilities. These adverse effects of dual practice are most pronounced whenprivate practice is held away from the puskesmas. These results have important bearingson human resource management of universal health care provision