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The impact of competition on management quality: evidence from public hospitals

  • Propper, C
  • Bloom, N
  • Seiler, S
  • Van Reenen, J

In this paper we examine the causal impact of competition on management quality. We analyze the hospital sector where geographic proximity is a key determinant of competition, and English public hospitals where political competition can be used to construct instrumental variables for market structure. Since almost all major English hospitals are government run, closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment. We find that management quality - measured using a new survey tool - is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions (AMI). More importantly, we find that higher competition (as indicated by a greater number of neighboring hospitals) is positively correlated with increased management quality, and this relationship strengthens when we instrument the number of local hospitals with local political competition. Adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10.7% reduction in heart-attack mortality rates.

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Paper provided by Imperial College, London, Imperial College Business School in its series Working Papers with number 5915.

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Date of creation: 01 Jan 2013
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Handle: RePEc:imp:wpaper:5915
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  1. Bloom, Nicholas & Van Reenen, John, 2010. "Human Resource Management and Productivity," CEPR Discussion Papers 7849, C.E.P.R. Discussion Papers.
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  13. Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
  14. Kira R. Fabrizio & Nancy L. Rose & Catherine D. Wolfram, 2007. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency," American Economic Review, American Economic Association, vol. 97(4), pages 1250-1277, September.
  15. David M. Cutler & Robert S. Huckman & Jonathan T. Kolstad, 2009. "Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery," Harvard Business School Working Papers 10-011, Harvard Business School.
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  18. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
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  24. Nagler, Jonathan & Leighley, Jan, 1992. "Presidential Campaign Expenditures: Evidence on Allocations and Effects," Public Choice, Springer, vol. 73(3), pages 319-33, April.
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