Working Paper: NBER ID: w12301
Authors: Martin Gaynor
Abstract: The goal of this paper is to identify key issues concerning the nature of competition in health care markets and its impacts on quality and social welfare and to identify pertinent findings from the theoretical and empirical literature on this topic. The theoretical literature in economics on competition and quality, the theoretical literature in health economics on this topic, and the empirical findings on competition and quality in health care markets are surveyed and their findings assessed. \n\tTheory is clear that competition increases quality and improves consumer welfare when prices are regulated (for prices above marginal cost), although the impacts on social welfare are ambiguous. When firms set both price and quality, both the positive and normative impacts of competition are ambiguous. The body of empirical work in this area is growing rapidly. At present it consists entirely of work on hospital markets. The bulk of the empirical evidence for Medicare patients shows that quality is higher in more competitive markets. The empirical results for privately insured patients are mixed across studies.
Keywords: No keywords provided
JEL Codes: I1; L1; L3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| competition (L13) | quality (L15) |
| competition (L13) | consumer welfare (D69) |
| competition (L13) | quality (Medicare patients) (I18) |
| competition (L13) | quality (privately insured patients) (I11) |
| competition (L13) | excessive quality provision (L15) |