Entry and Competition of Healthcare Providers in Slovakia: A Spatial Analysis

Martin Lábaj and Peter Mandžak
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Peter Mandžak: Value for Money Division, Ministry of Finance of the Slovak Republic

Journal of Economics / Ekonomicky casopis, 2022, vol. 70, issue 3, 211-236

Abstract: We study the relationship between market size and the number of firms in several healthcare professions in Slovakia to provide new evidence about their entry decisions and the toughness of competition on the market. The local market size that would support the entry of the first general practitioner was estimated at 1,400 inhabitants. This threshold equaled 1,700 inhabitants for the first pharmacy to enter and 2,300 for pediatricians. The population would have to more than double for the second professional to enter. To support the second firm, the population per firm in the market would have to increase by 30% for pharmacies, 25% for general practitioners, and almost 40% for pediatricians. However, after the entry of the second firm, the intensity of competition did not change, except for pediatricians. The results were robust to spatial interactions. Our estimates of spatial interactions showed negative (but decreasing) spatial spillover effects for pharmacies, general practitioners, and dentists between 1995 and 2010. In this period, competitive effects prevailed and outweighed demand spillovers. We document that the demand effect continued to grow after 2010 and in 2017 outweighed the competition effect for pharmacies. We show that an increase in the total number of pharmacies since 2010 led to diffusion into smaller markets and that the number of markets without a pharmacy decreased.

Keywords: entry models; healthcare market; industrial organization (search for similar items in EconPapers)
JEL-codes: D22 I11 L22 R12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sav:journl:v:70:y:2022:i:3:p:211-236

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