Regression Discontinuity Designs with an Endogenous Forcing Variable and an Application to Contracting in Health Care

44 Pages Posted: 12 Dec 2011 Last revised: 14 Dec 2011

See all articles by Patrick Bajari

Patrick Bajari

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Han Hong

Independent

Minjung Park

Ewha Womans University

Robert J. Town

National Bureau of Economic Research (NBER)

Date Written: December 2011

Abstract

Regression discontinuity designs (RDDs) are a popular method to estimate treatment effects. However, RDDs may fail to yield consistent estimates if the forcing variable can be manipulated by the agent. In this paper, we examine one interesting set of economic models with such a feature. Specifically, we examine the case where there is a structural relationship between the forcing variable and the outcome variable because they are determined simultaneously. We propose a modi...ed RDD estimator for such models and derive the conditions under which it is consistent. As an application of our method, we study contracts between a large managed care organization and leading hospitals for the provision of organ and tissue transplants. Exploiting "donut holes" in the reimbursement contracts we estimate how the total claims filed by the hospitals depend on the generosity of the reimbursement structure. Our results show that hospitals submit significantly larger bills when the reimbursement rate is higher, indicating informational asymmetries between the payer and hospitals in this market.

Suggested Citation

Bajari, Patrick and Hong, Han and Park, Minjung and Town, Robert J., Regression Discontinuity Designs with an Endogenous Forcing Variable and an Application to Contracting in Health Care (December 2011). NBER Working Paper No. w17643, Available at SSRN: https://ssrn.com/abstract=1971407

Patrick Bajari (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

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HOME PAGE: http://www-personal.umich.edu/~bajari/

National Bureau of Economic Research (NBER)

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Han Hong

Independent

Minjung Park

Ewha Womans University ( email )

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Seodaemun-gu
Seoul 120-750, Seoul Seoul 120
Korea, Republic of (South Korea)

Robert J. Town

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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