Health Economics

Objective

The course examines the regulation of health care systems through the lens of microeconomic analysis. It studies policy reforms that seek to improve the performance of health systems, e.g., by improving care quality, by designing incentives to reduce costs, by enhancing coordination or by optimizing the matching between patients and providers. The course identifies market failures in the health care industry and evaluates reforms designed to remedy them. To explain the geographic dispersion of care practices observed in many countries, it highlights empirical studies that document healthcare demand behavior as well as the heterogeneity among providers in beliefs and skills.

The aim of the course is to familiarize students with the functioning of health care industries and with the main on-going policy debates in developed countries: inequality in the access to health care, heterogeneity in the quality of care, funding inefficiencies, etc. Equipped with this knowledge, students can bring their expertise to private companies, government bodies, and health research institutes.

The course has six 3-hour sessions. The evaluation has two components of equal importance:

-          Oral presentations with slides during the sessions

-          Final written exam based on two articles given in advance (paper copies will be available during the exam).

Planning

1. 1.       Benefits and Costs of Health Care

   a.       Saving lives, curing people

   Alsan, M., & Wanamaker, M. (2018). Tuskegee and the health of black men. The Quarterly Journal of Economics, 133(1), 407-455.

   Card, D., Dobkin, C., & Maestas, N. (2009). Does Medicare save lives? The Quarterly Journal of Economics, 124(2), 597-636.

   Goodman-Bacon, A. (2018). Public insurance and mortality: Evidence from Medicaid implementation. Journal of Political Economy, 126(1), 216-262.

   b.      A worldwide comparison of healthcare spending (OECD)

    

   2.       Health Insurance

   a.       Adverse Selection (regulation, risk adjustment)

   Einav, L., Finkelstein, A., & Schrimpf, P. 2010. Optimal Mandates and the Welfare Cost of Asymmetric Information: Evidence from the U.K. Annuity Market. Econometrica 78(3), 1031-1092.

   Einav, L., Finkelstein, A., & Cullen, M. R. (2010). Estimating welfare in insurance markets using variation in prices. The Quarterly Journal of Economics, 125(3), 877-921.

   b.      Moral Hazard (ex ante vs. ex post, patient cost-sharing)

   Einav, L., Finkelstein, A., & Schrimpf, P. (2015). The response of drug expenditure to nonlinear contract design: Evidence from Medicare Part D. The Quarterly Journal of Economics, 130(2), 841-899.

   Einav, L., Finkelstein, A., Ryan, S. P., Schrimpf, P., & Cullen, M. R. (2013). Selection on moral hazard in health insurance. American Economic Review, 103(1), 178-219.

   Einav, L., & Finkelstein, A. (2018). Moral hazard in health insurance: what we know and how we know it. Journal of the European Economic Association, 16(4), 957-982.

   c.       Health and Labor Markets (sick leaves)

   Barone V., On the Design of Paid Sick Leave: A Structural Approach, Discussion Paper, 2025

    

   3.       Provision of Health Care

   a.       Doctors (labor supply, physician cost-sharing)

   Clemens, J., & Gottlieb, J. D. (2014). Do physicians' financial incentives affect medical treatment and patient health? American Economic Review, 104(4), 1320-1349.

   Coudin, E., Pla, A., & Samson, A. L. (2015). GP responses to price regulation: Evidence from a French nationwide reform. Health Economics, 24(9), 1118-1130.

   Klein, T., & Salm, M. (2024). Is physician cost-sharing an alternative to patient cost-sharing ? Working paper.

   Wilner, L., & Choné, P. (2025). Physician labor supply, financial incentives, and access to healthcare. CESifo Working paper 11947.

   b.      Hospitals (Payment schemes, competition, for-profit vs. nonprofit)

   Choné, P., & Wilner, L. (2022). Financial incentives and competitive pressure : The case of the hospital industry, Journal of the European Economic Association, 20(2), 626–666.

   Dafny, L. S. (2005). How do hospitals respond to price changes? American Economic Review, 95(5), 1525-1547.

   Shleifer, A. (1985). A theory of yardstick competition. The RAND journal of economics, 319-327.

    

   4.       Access to Health Care

   a.       Geographic dispersion

   Badinski, I. (2022). Geographic Variation in Healthcare Utilization: The Role of Physicians. PhD thesis, Chapter 3, MIT.

   Finkelstein, A., Gentzkow, M., & Williams, H. (2016). Sources of geographic variation in health care: Evidence from patient migration. The Quarterly Journal of Economics, 131(4), 1681–1726.

   Finkelstein, A., Gentzkow, M., & Williams, H. (2021). Place-based drivers of mortality: Evidence from migration. American Economic Review, 111(8), 2697–2735.

   Pilvar, H. (2024). Primary Care Doctors’ Shortages and the Role of Financial Incentives, Working paper.

   b.      Doctor Decision Making and Practice styles

   Currie, J., MacLeod, B. & Musen, K. (2025). Doctor Decision Making and Patient Outcomes, Journal of Economic Literature, forthcoming.

   Cutler, D., Skinner, J. S., Stern, A. D., & Wennberg, D. (2019). Physician beliefs and patient preferences: A new look at regional variation in health care spending. American Economic Journal: Economic Policy, 11(1), 192-221.

   5.       Coordination of care

   a.       Care continuity, Referrals

   Agha, L., Ericson, K. M., Geissler, K. H., & Rebitzer, J. B. (2022). Team relationships and performance: Evidence from healthcare referral networks. Management Science, 68(5), 3735-3754.

   Agha, L., Frandsen, B., & Rebitzer, J. B. (2019). Fragmented division of labor and healthcare costs: Evidence from moves across regions. Journal of Public Economics, 169, 144-159.

    

   6.       Patient-Provider Matching

   a.       Allocation of Patients to Doctors

   Dahlstrand, A. (2025). Defying Distance? The Provision of Services in the Digital Age, Working paper.

   Sarsons, H. (2025). Interpreting Signals in the Labor Market: Evidence from Medical Referrals, Working paper.

   b.      Matching between Surgeons and Hospitals 

   Mourot, P. (2025). Should Top Surgeons Practice at Top Hospitals? Sorting and Complementarities in Healthcare, Working paper.

   General reference

   Handbook of Health Economics. 1st Edition, Volume 2. (2011). Editors: Mark V. Pauly, Thomas G. McGuire, Pedro Pita Barros.