The Impact of Competition on Management Quality: Evidence from Public Hospitals

42 Pages Posted: 19 Jul 2010

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Carol Propper

Imperial College London Business School; Centre for Economic Policy Research (CEPR); University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)

Stephan Seiler

UCLA Anderson School of Management

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2010

Abstract

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.

Keywords: competition, hospitals, management, productivity

JEL Classification: F12, I18, J31, J45

Suggested Citation

Bloom, Nicholas and Propper, Carol and Seiler, Stephan and Van Reenen, John Michael, The Impact of Competition on Management Quality: Evidence from Public Hospitals (June 2010). CEPR Discussion Paper No. DP7862. Available at SSRN: https://ssrn.com/abstract=1640384

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building, Room 231
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Stanford, CA 94305-6072
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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Carol Propper

Imperial College London Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )

12 Priory Road
Bristol BS8 1TN
United Kingdom

HOME PAGE: http://www.bris.ac.uk/Depts/Economics/department/profiles/propper.htm

Stephan Seiler

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095
United States

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

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United States

Institute for Fiscal Studies (IFS) ( email )

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London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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