Working Paper: CEPR ID: DP14292
Authors: Sebastian Fleitas
Abstract: Increased competition creates incentives for health-care providers to improve quality by incorporating better inputs, like higher-skill physicians. However, because the supply of high-skill physicians is relatively inelastic in the short run, increases in competition may lead only to increases in returns to skill. I leverage a reform in Uruguay that increased competition among completely vertically integrated providers by reducing lock-in of consumers. Using administrative data on wages and hours and a measure of physicians’ skills based on test scores from medical school, I show that increased competition increased the returns to skill without strong evidence of an increase in quality.
Keywords: competition; inertia; quality; returns to skill
JEL Codes: L15; J31; J44; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased competition in the Uruguayan healthcare system (L59) | significant increases in the returns to skill for high-skill medical specialists (J44) |
| Change in the regulated mobility regime (O24) | increase of approximately 11 units in the elasticity of wages to scores (J31) |
| Change in the regulated mobility regime (O24) | wage premium associated with a one standard deviation difference in test scores increased by 27 percentage points (J31) |
| Increased competition in the Uruguayan healthcare system (L59) | no statistically significant increase in quality (relative hours worked by high-skill vs low-skill specialists) (J24) |
| Increased competition in the Uruguayan healthcare system (L59) | largest estimated effect of the reform on hours worked was only 0.45 units (J38) |