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

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

No 15214, NBER Working Papers from National Bureau of Economic Research, Inc

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-codes: I10 I11 I18 L1 L15 L23 L5 L8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2009-08
Note: HC IO PR
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Working Paper: Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery (2009)
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