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Certificate-of-Need Regulation and the Diffusion of Innovations: A Random Coefficient Model


  • Caudill, Steven B
  • Ford, Jon M
  • Kaserman, David L


In this paper, we examine empirically the effect that certificate-of-need regulation by state health planning organizations has had on the speed of diffusion of a relatively new medical technology-haemodialysis. Specifically, we test the hypothesis that a requirement that investments be subject to certificate-of-need review has significantly slowed the rate of adoption of this particular treatment modality. In subjecting this hypothesis to empirical verification, we estimate a random coefficient model. This approach allows us to make more efficient use of the available data than the traditional two-stage approach to modeling diffusion processes wherein separate logistic functions are first estimated over the time series observations followed by hypothesis tests conducted over the cross-sectional observations. We find evidence that certificate-of-need regulation slows the spread of haemodialysis technology. Copyright 1995 by John Wiley & Sons, Ltd.

Suggested Citation

  • Caudill, Steven B & Ford, Jon M & Kaserman, David L, 1995. "Certificate-of-Need Regulation and the Diffusion of Innovations: A Random Coefficient Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(1), pages 73-78, Jan.-Marc.
  • Handle: RePEc:jae:japmet:v:10:y:1995:i:1:p:73-78

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