Topics in public economics: Healthcare


This is based on recently published research papers focussing on a particular theme in Public Economics. Papers will be empirical or theoretical. We propose in 2020-2021 to focus on the economics of hospitals. An important theme in Health Economics that recently came to prominence. Everywhere in the world, hospitals pose interesting and specific problems, both in Economic Theory (in particular, Industrial Organization; Optimal Regulation, Incentives and Public Finance) and Applied Econometrics. 

Year 2020-2021: Health Economics — Hospitals

We will more specifically study the recent international literature on the following three themes.


1-      Hospital Governance (Profit vs Non-Profit) and Ownership (Private vs Public)
This is an important theme. Why are most hospitals not-for-profit institutions? We’ll study both the theory of nonprofit organizations and the empirical literature testing the relative performance of profit versus non-profit, and public versus private hospitals.

2-      Optimal Regulation of Hospitals: Investment, Pricing, Subsidies, Reimbursement Rules
Several forms of hospital funding and regulation coexist today in the world. It seems that all the existing systems have both advantages and shortcomings. We’ll study hospital regulation from the point of view of the theory of contracts and incentives.

3-      Hospital Competition.
What are the effects of increased competition on hospital costs, prices and the quality of service?  This question is still unsettled empirically. Again we’ll study both the theoretical arguments and empirical results on the usefulness of competition.


For a short introduction, see chapter 6 on hospitals in the following textbook,

Sloan, Frank A., and Chee-Ruey Hsieh (2016), Health Economics, second edition, MIT Press, Cambridge Massachusetts.

The following list of references (not a reading list) is  an indication and proposes some points of entry in the relevant literature.

Kessler, Daniel P. and Mark B. McClellan (2000), “Is Hospital Competition Socially Wasteful?”, Quarterly Journal of Economics, 115(2), 577-615.

Chandra, Amitabh, Finkelstein, Amy, Sacarny, Adam, and Chad Syverson (2016), “Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector”, American Economic Review, 106(8), 2110-2144.

Gaynor, Martin, Moreno-Serra, Rodrigo, and Carol Propper (2013), “Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service”, American Economic Journal: Economic Policy, 5(4), 134-166.

Bloom, Nicholas, Propper, Carol, Seiler, Stephan and John van Reenen (2015), “The Impact of Competition on Management Quality: Evidence from Public Hospitals”, Review of Economic Studies, 82, 457-489.

Cooper, Zack, Gibbons, Stephen, Jones, Simon and Alistair McGuire (2011), “Does Hospital Competition Save Lives? Evidence from the English NHS patient Choice Reforms”, Economic Journal, 121, F228-F260.

Propper, Carol and John van Reenen (2010), “Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labor Markets on Hospital Performance”, Journal of Political Economy, 118(2), 222-273.

Choné, Philippe and Lionel Wilner (2020), “Financial Incentives and Competitive Pressure: The Case of the Hospital Industry”, CEPR Discussion Paper 14328(v.2), CEPR, London, UK.

Duggan, Mark, (2000), “Hospital Ownership and Public Medical Spending”, Quarterly Journal of Economics, 115(4), 1343-1373.

Duggan, Mark (2002), “Hospital Market Structure and the Behavior of Not-for-Profit Hospitals”, Rand Journal of Economics, 33(3), 433-446.

Lakdawalla, Darius and Tomas Philipson (2006), “The Nonprofit Sector and Industry Performance”, Journal of Public Economics, 90, 1681-1698.

Besley, Timothy and James M. Malcomson (2018), “Competition in Public Service Provision: The Role of Not-for-Profit Providers”, Journal of Public Economics, 162, 158-172.

Background references.

Anderson, Simon P., de Palma, André and Jacques-François Thisse (1992), Discrete Choice Theory of Product Differentiation, MIT Press, Cambridge, Massachusetts.

Berry, Steven T. (1994), “Estimating Discrete-Choice Models of Product Differentiation”, Rand Journal of Economics, 25(2), 242-262.

Berry, Steven, Levinsohn, James and Ariel Pakes (1995), “Automobile Prices in Market Equilibrium”, Econometrica, 63(4), 841-890.

Gaynor, Martin, Ho, Kate and Robert J. Town (2015), “The Industrial Organization of Health-Care Markets”, Journal of Economic Literature, 53(2), 235-284.

Gaynor, Martin and Robert J. Town (2012), “Competition in Health Care Markets”, Chapter 9 in Handbook of Health Economics, volume 2, Elsevier, Amsterdam.

Glaeser, Edward L. and Andrei Shleifer (2001), “Not-for-Profit Entrepreneurs”, Journal of Public Economics, 81, 99-105.

Juven, Pierre-André (2016), Une santé qui compte ? Les coûts et les tarifs de l’hôpital public, série Partage du savoir, PUF, Paris.

Newhouse, James P. (1970), “Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital”, American Economic Review, 60(1), 64-74.

Sloan, Frank A. and Chee-Ruey Hsieh (2016), Health Economics, second edition, MIT Press, Cambridge, Massachusetts.

Weisbrod, Burton A. (1988), The Nonprofit Economy, Harvard University Press, Cambridge, Massachusetts.