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Testing a Roy Model with Productivity Spillovers: Evidence from the Treatment of Heart Attacks

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Author Info
Amitabh Chandra
Douglas Staiger
Abstract

Productivity spillovers are often cited as a reason for geographic specialization in production. A large literature in medicine documents specialization across areas in the use of surgical treatments, which is unrelated to patient outcomes. We show that a simple Roy model of patient treatment choice with productivity spillovers can generate these facts. Our model predicts that high-use areas will have higher returns to surgery, better outcomes among patients most appropriate for surgery, and worse outcomes among patients least appropriate for surgery. We find strong empirical support for these and other predictions of the model, and decisively reject alternative explanations commonly proposed to explain geographic variation in medical care.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10811.

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Date of creation: Oct 2004
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Handle: RePEc:nbr:nberwo:10811

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I1 - Health, Education, and Welfare - - Health
J0 - Labor and Demographic Economics - - General

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  4. Enrico Moretti, 2003. "Human Capital Externalities in Cities," NBER Working Papers 9641, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Goolsbee, Austan & Klenow, Peter J, 2002. "Evidence on Learning and Network Externalities in the Diffusion of Home Computers," Journal of Law & Economics, University of Chicago Press, vol. 45(2), pages 317-43, October.
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  6. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March. [Downloadable!] (restricted)
  7. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  8. David M. Cutler, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 881-906, September.
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