Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery

David M. Cutler, Robert S. Huckman and Jonathan T. Kolstad

American Economic Journal: Economic Policy, 2010, vol. 2, issue 1, pages 51-76

Abstract: Prior studies suggest that with elastically supplied inputs free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON ) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher quality surgeons, and that this entry was approximately welfare neutral. (JEL I11, L13)

JEL-codes: I11 L13 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/pol.2.1.51
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Working Paper: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2009)
Working Paper: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2009)
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