Quantifying the Impacts of Limited Supply: The Case of Nursing Homes

32 Pages Posted: 29 Oct 2015

See all articles by Andrew T. Ching

Andrew T. Ching

Johns Hopkins University - Carey Business School

Fumiko Hayashi

Federal Reserve Bank of Kansas City

Hui Wang

Peking University - Guanghua School of Management

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Date Written: November 2015

Abstract

This article develops a new estimation method that accounts for excess demand and the unobserved component of product quality. We apply our method to study the Wisconsin nursing home market in 1999 and find that nearly 20% of elderly qualified for Medicaid were rationed out. However, our counterfactual experiment shows that the net welfare gain of fulfilling all nursing home demands may be small, because the welfare gain could be largely offset by the increase in Medicaid expenditures. We also find that a 1% increase in quality would crowd out 3.2% Medicaid patients in binding nursing homes.

Suggested Citation

Ching, Andrew T. and Hayashi, Fumiko and Wang, Hui, Quantifying the Impacts of Limited Supply: The Case of Nursing Homes (November 2015). International Economic Review, Vol. 56, Issue 4, pp. 1291-1322, 2015, Available at SSRN: https://ssrn.com/abstract=2682788 or http://dx.doi.org/10.1111/iere.12138

Andrew T. Ching (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Fumiko Hayashi

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

Hui Wang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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