Who benefits when inertia is reduced? Competition, quality and returns to skill in health care markets

Sebastian Fleitas

No 14292, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: I13 I18 J31 J44 L15 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-com and nep-hea
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Working Paper: Who benefits when inertia is reduced? Competition, quality and returns to skill in health care markets (2018)
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