Avoiding Regulation: Evidence from Nursing Homes

Alden Cheng and Riley League

No 35849, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study strategic responses by firms to threshold-based regulations. We document extensive bunching in response to additional staffing requirements for California nursing homes with at least 100 beds. To estimate the regulation’s effect on staffing, we develop a novel treatment effects estimator for threshold-based regulations under precise manipulation, by decomposing firms into response types based on counterfactual and realized staffing and size, separating causal effects from selection. We estimate that higher staffing above the threshold is nearly entirely due to selection, with low-staffing facilities manipulating their size to avoid the regulation. These size distortions limit access, particularly for disadvantaged patients.

JEL-codes: I11 I18 L51 (search for similar items in EconPapers)
Date: 2026-10
Note: EH
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