CEP LSE RSS Contact Us YouTube Facebook Twitter

Abstract:

cover
CEP Discussion Paper
The Impact of Competition on Management Quality: Evidence from Public Hospitals
Nicholas Bloom, Carol Propper, Stephan Seiler and John Van Reenen May 2010
Paper No' CEPDP0983:
Full Paper (pdf)
Data Files associated with this paper.

JEL Classification: J45; F12; I18; J31


Tags: management; hospitals; competition; productivity

We analyze the causal impact of competition on managerial quality (and hospital performance). To address the endogeneity of market structure we analyze the English public hospital sector where entry and exit are controlled by the central government. Because closing hospitals in areas where the governing party is expecting a tight election race (“marginals”) is rare due to the fear of electoral defeat, we can use political marginality as an instrumental variable for the number of hospitals in a geographical area. We find that higher competition is positively correlated with management quality, measured using a new survey tool. Adding a rival hospital increases management quality by 0.4 standard deviations and increases survival rates from emergency heart attacks by 8.8%. We confirm the validity of our IV strategy by conditioning on marginality in the hospital’s own catchment area, thus identifying purely off the marginality of rival hospitals. This controls for “hidden policies” that could be used in marginal districts to improve hospital management. We also run placebo tests of marginality on schools, a public service where the central government has no formal influence on market structure.

This paper has been published as:
The Impact of Competition on Management Quality: Evidence from Public Hospitals, Nicholas Bloom, Carol Propper, Stephan Seiler and John Van Reenen, The Review of Economic Studies, January 2015