effects of profitability and liquidity on r d intensity japanese and u s companies compared this study investigates the proposition that japanese companies have a greater propensity than u s companies to sustain commitment to r d in the face of fluctuating profits and liquidity the anal

direct estimation of synergy a new approach to the diversity performance debate this study examines the linkages between relatedness and synergy in the context of diversification among u s pharmaceutical firms for the period 1960 1980 rather than assume as in the entropy herfindahl and concentric indices of diversification that the levels of synergy generated by different related combinations of business units are identical we estimate synergy directly using a modified version of the concentric index in addition to estimating synergy using capital market performance of the firm as a whole we examine the effects of nondrug diversification on the innovative productivity of firms pharmaceutical divisions alone our two main findings are that production relatedness such as that between drugs and chemicals in fact did not imply synergy over the period of our study and that the patterns of synergy for different types of relatedness shifted over time with the industry life cycle

does health plan generosity enhance hospital market power we test whether the generosity of employer sponsored health insurance facilitates the exercise of market power by hospitals we construct indices of health plan generosity and the price and volume of hospital services using data from truven marketscan for 601 counties from 2001 to 2007 we use variation in the industry and union status of covered workers within a county over time to identify the causal effects of generosity although ols estimates fail to reject the hypothesis that generosity facilitates the exercise of hospital market power iv estimates show a statistically significant and economically important positive effect of plan generosity on hospital prices in uncompetitive markets but not in competitive markets our results suggest that most of the aggregate effect of hospital market structure on prices found in previous work may be coming from areas with generous plans

do doctors practice defensive medicine defensive medicine is a potentially serious social problem if fear of liability drives health care providers to administer treatments that do not have worthwhile medical benefits then the current liability system may generate inefficiencies much larger than the costs of compensating malpractice claimants to obtain direct empirical evidence on this question we analyze the effects of malpractice liability reforms using data on all elderly medicare beneficiaries treated for serious heart disease in 1984 1987 and 1990 we find that malpractice reforms that directly reduce provider liability pressure lead to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications we conclude that liability reforms can reduce defensive medical practices

ceo characteristics and firm r d spending over the past fifteen years a number of studies have examined the determinants of firm r d spending these studies however almost invariably focus on the role of firm or external ownership characteristics in predicting r d spending while overlooking the attributes of the top managers involved in allocating corporate resources in this study we change that focus by empirically examining how r d spending as compared to industry competitors varies at firms based on the characteristics of their ceos using a sample of publicly traded firms we find that ceo characteristics explain a significant proportion of the sample variance in firm r d spending even when corporate strategy ownership structure and other firm level attributes are controlled in terms of individual ceo characteristics we find that r d spending is greater at firms where ceos are younger have greater wealth invested in firm stock and signifacant career experience in marketing and or engineering r d in contrast to existing theory we find that the amount of a ceo s formal education had no significant association with r d spending once a ceo has attained a college degree however significant r d spending increases are found at firms where ceos have advanced science related degrees from subgroup analyses we further find that ceo effects on relative r d spending increase with longer ceo tenure implying that ceos over time may mold r d spending to suit their own preferences from these results we make implications for both research on determinants of r d spending and managerial practice

the induced innovation hypothesis and energy saving technological change we develop a methodology for testing hicks s induced innovation hypothesis by estimating a product characteristics model of energy using consumer durables augmenting the hypothesis to allow for the ine uence of government regulations for the products we explored the evidence suggests that i the rate of overall innovation was independent of energy prices and regulations ii the direction of innovation was responsive to energy price changes for some products but not for others iii energy price changes induced changes in the subset of technically feasible models that were offered for sale iv this responsiveness increased substantially during the period after energy efficiency product labeling was required and v nonetheless a sizable portion of efficiency improvements were autonomous

executive incentives and the horizon problem an empirical investigation abstract this paper investigates the hypothesis that ceos in their final years of office manage discretionary investment expenditures to improve short term earnings performance we examine the behavior of r d expenditures for a sample of firms in industries that have significant ongoing r d activities the results suggest that ceos spend less on r d during their final years in office however we find the reductions in r d expenditures are mitigated through ceo stock ownership there is no evidence that the reduced r d expenditures are associated with either poor firm performance or reductions in investment expenditures that are capitalized for accounting purposes

does government r d policy mainly benefit scientists and engineers conventional wisdom holds that the social rate of return to r d significantly exceeds the private rate of return and therefore r d should be subsidized in the u s the government has directly funded a large fraction of total r d spending this paper shows that there is a serious problem with such government efforts to increase inventive activity the majority of r d spending is actually just salary payments for r d workers their labor supply however is quite inelastic so when the government funds r d a significant fraction of the increased spending goes directly into higher wages using cps data on wages of scientific personnel this paper shows that government r d spending raises wages significantly particularly for scientists related to defense such as physicists and aeronautical engineers because of the higher wages conventional estimates of the effectiveness of r d policy may be 30 to 50 too high the results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support government funding directly crowds out private inventive activity this abstract was borrowed from another version of this item

market incentives and pharmaceutical innovation i study the impact of the orphan drug act oda which established tax incentives for rare disease drug development i examine the flow of new clinical drug trials for a large set of rare diseases among more prevalent rare diseases the oda led to a significant and sustained increase in new trials the impact for less prevalent rare diseases was limited to an increase in the stock of drugs tax credits can stimulate rd yet because they leave revenue margins unaffected tax credits appear to have a more limited impact on private innovation in markets with smaller revenue potential

monopolistic competition when price and quality are imperfectly observable consider the symmetric equilibrium of a monopolistically competitive industry in which manufacturers select price and quality to maximize expected profit and consumers maximize utility by conducting costly search among sellers using an optimal sequential search rule consumers search among sellers because i each consumer idiosyncratically evaluates each seller s quality and ii a retailing sector generates variation in the prices consumers pay consumers are handicapped in their search because their observations of firms price and quality levels are noisy an improvement in price information is represented by an increase in the precision with which consumers observe sellers prices similarly an improvement in quality information is represented by an increase in precision with which consumers observe sellers quality levels an improvement of either type of information may increase or decrease welfare the perverse case in which improved price information decreases welfare occurs when price competition among firms becomes so intense relative to quality competition that firms select severely suboptimal levels of quality a consumer searching among monopolistically competitive sellers may have difficulty accurately observing the price and quality of each seller s product he must infer from his prior beliefs and noisy observations the true values of the product s price and quality attributes we show that increasing the precision with which consumers observe an attribute of a product makes the inference problem easier and causes the demand the seller faces with respect to that attribute to become more elastic the equilibrium level of that attribute changes accordingly and since the equilibrium levels of price and quality interact the equilibrium level of the other attribute changes as well these equilibrium effects can be perverse in two ways first if the precision of quality observation is fixed then improvement in the precision of price observation can reduce welfare the chain of causation is this increasing the precision of price observation causes price to fall the resulting smaller price cost margin induces sellers to reduce quality de

the effect of entry regulation in the health care sector the case of home health the consequences of government regulation in the post acute care sector are not well understood we examine the effect of entry regulation on quality of care in home health care by analyzing the universe of hospital discharges during 2006 for publicly insured beneficiaries about 4 5 million and subsequent home health admissions to determine whether there is a significant difference in home health utilization hospital readmission rates and health care expenditures in states with and without certificate of need laws con regulating entry we identify these effects by looking across regulated and nonregulated states within hospital referral regions which characterize well defined health care markets and frequently cross state boundaries we find that con states use home health less frequently but system wide rehospitalization rates overall medicare expenditures and home health practice patterns are similar removing con for home health would have negligible system wide effects on health care costs and quality

does competition from private surgical centres improve public hospitals performance evidence from the english national health service abstract this paper examines the impact of a government programme which facilitated the entry of for profit surgical centres to compete against incumbent national health service hospitals in england we examine the impact of competition from these surgical centres on the efficiency measured by pre surgery length of stay for hip and knee replacement patients and case mix of incumbent public hospitals we exploit the fact that the government chose the broad locations where these surgical centres independent sector treatment centres or istcs would be built based on local patient waiting times not length of stay or clinical quality to construct treatment and control groups that are comparable with respect to key outcome variables of interest using a difference in difference estimation strategy we find that the government facilitated entry of surgical centres led to shorter pre surgery length of stay at nearby public hospitals however these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker this paper highlights a potential trade off that policymakers face when they promote competition from private for profit firms in markets for the provision of public services

how acquisitions affect firm behavior and performance evidence from the dialysis industry many industries have become increasingly concentrated through mergers and acquisitions which in health care may have important consequences for spending and outcomes using a rich panel of medicare claims data for nearly one million dialysis patients we advance the literature on the effects of mergers and acquisitions by studying the precise ways providers change their behavior following an acquisition we base our empirical analysis on more than 1 200 acquisitions of independent dialysis facilities by large chains over a 12 year period and find that chains transfer several prominent strategies to the facilities they acquire most notably acquired facilities converge to the behavior of their new parent companies by increasing patients doses of highly reimbursed drugs replacing high skill nurses with less skilled technicians and waitlisting fewer patients for kidney transplants we then show that patients fare worse as a result of these changes outcomes such as hospitalizations and mortality deteriorate with our long panel allowing us to identify these effects from within facility or within patient variation around the acquisitions because overall medicare spending increases at acquired facilities mostly as a result of higher drug reimbursements this decline in quality corresponds to a decline in value for payers we conclude the article by considering the channels through which acquisitions produce such large changes in provider behavior and outcomes finding that increased market power cannot explain the decline in quality rather the adoption of the acquiring firm s strategies and practices drives our main results with greater economies of scale for drug purchasing responsible for more than half of the change in profits following an acquisition

politics and economics in weak and strong states abstract while much research in political economy points out the benefits of limited government political scientists have long emphasized the problems created in many less developed nations by weak states which lack the power to tax and regulate the economy and to withstand the political and social challenges from non state actors i construct a model in which the state apparatus is controlled by a self interested ruler who tries to divert resources for his own consumption but who can also invest in socially productive public goods both weak and strong states create distortions when the state is excessively strong the ruler imposes such high taxes that economic activity is stifled when the state is excessively weak the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods i show that the same conclusion applies in the analysis of both the economic power of the state i e its ability to raise taxes and its political power i e its ability to remain entrenched from the citizens i also discuss how under certain circumstances a different type of equilibrium which i refer to as consensually strong state equilibrium can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods the consensually strong state might best correspond to the state in oecd countries where taxes are high despite significant control by the society over the government

the other ex ante moral hazard in health it is well known that pooled insurance coverage can induce people to make inefficiently low investments in self protective activities we identify another ex ante moral hazard that runs in the opposite direction lower levels of self protection and the associated chronic conditions and behavioral patterns such as obesity smoking and malnutrition increase the incidence of many diseases and consumption of treatments to those diseases this increases the reward for innovation and thus benefits the innovator it also increases treatment innovation which benefits all consumers as individuals do not take these positive externalities into account their investments in self protection are inefficiently high we quantify the lower bound of this externality for obesity the lower bound is independent of how much additional innovation is generated the results show that the externality we identify offsets the negative medicare induced insurance externality of obesity the medicare induced obesity subsidy is thus not a sufficient rationale for soda taxes fat taxes or other penalties on obesity the quantitative finding also implies that the other ex ante moral hazard that we identify can be as important as the ex ante moral hazard that has been a central concept in health economics for decades

the impact of hospital market structure on patient volume average length of stay and the cost of care a variety of recent proposals rely heavily on market forces as a means of controlling hospital cost inflation sceptics argue however that increased competition might lead to cost increasing acquisitions of specialized clinical services and other forms of non price competition as means of attracting physicians and patients using data from hospitals in 1972 we analyzed the impact of market structure on average hospital costs measured in terms of both cost per patient and cost per patient day under the retrospective reimbursement system in place at the time hospitals in more competitive environments exhibited significantly higher costs of production than did those in less competitive environments

static and dynamic effects of health policy evidence from the vaccine industry public policies designed to increase utilization of existing technologies may also affect incentives to develop new technologies this paper investigates this phenomenon by examining policies designed to increase usage of preexisting vaccines i find that these policies were associated with a 2 5 fold increase in clinical trials for new vaccines for several diseases the induced innovation is socially wasteful though small in magnitude in one case however the dynamic social welfare benefits from induced innovation exceed the policies static benefits from increasing vaccination with existing technology these findings underscore the importance of including technological progress in economic analysis of public policy

did medicare induce pharmaceutical innovation the introduction of medicare in 1965 was the single largest change in health insurance coverage in u s history many economists and commentators have conjectured that the introduction of medicare may have also been an important impetus for the development of new drugs that are now commonly used by the elderly and have substantially extended their life expectancy in this paper we investigate whether medicare induced pharmaceutical innovations directed towards the elderly medicare could have played such a role only if two conditions were met first medicare would have to increase drug spending by the elderly second the pharmaceutical companies would have to respond to the change in market size for drugs caused by medicare by changing the direction of their research our empirical work finds no evidence of a first stage effect of medicare on prescription drug expenditure by the elderly correspondingly we also find no evidence of a shift in pharmaceutical innovation towards therapeutic categories most used by the elderly on the whole therefore our evidence does not provide support for the hypothesis that medicare had a major effect on the direction of pharmaceutical innovation this abstract was borrowed from another version of this item

pharmaceutical price controls and entry strategies abstract this paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls companies avoid price controlled markets and are less likely to introduce products in additional markets after entering a price controlled country launches into low price european countries are further delayed following legalization of parallel imports the results suggest that price regulation in one country affects entry into other countries and may affect the strategies of domestic firms

do physicians financial incentives affect medical treatment and patient health we investigate whether physicians financial incentives influence health care supply technology diffusion and resulting patient outcomes in 1997 medicare consolidated the geographic regions across which it adjusts physician payments generating area specific price shocks areas with higher payment shocks experience significant increases in health care supply on average a 2 percent increase in payment rates leads to a 3 percent increase in care provision elective procedures such as cataract surgery respond much more strongly than less discretionary services non radiologists expand their provision of mris suggesting effects on technology adoption we estimate economically small health impacts albeit with limited precision

nonprofit hospital mergers and the exercise of market power government challenges to mergers within the hospital industry have become more frequent many of those mergers involve nonprofit organizations rather than the for profit firms that are the norm in most other industries this difference in ownership has made no apparent difference in the antitrust agencies approach to proposed hospital mergers in this article i test the proposition that nonprofit and for profit hospitals price differently in response to the structure of the markets in which they compete based on a cross sectional analysis of california hospitals i find that estimated merger effects on hospital prices do vary by type of ownership in response to either higher market share or to the joint combination of higher share and higher market concentration private nonprofit hospital prices are statistically significantly lower than for profit hospital prices and on balance in this sample there is no evidence of any systematic price increasing effect on private nonprofit hospitals

organizational debut on the public stage marketing myopia and initial public offerings successful initial public offerings ipos provide firms with access to valuable resources but also put pressure on firms to impress potential investors with evidence of their current well being and prospects for future growth to impress investors ipo firms might curtail their marketing budgets which appears to inflate current earnings and provide evidence of current well being however curtailing marketing budgets unexpectedly during an ipo may be a myopic practice in that the immediate benefits of these budget cuts are offset by their longer term adverse consequences on financial well being the extent of these adverse consequences in turn may be moderated by external firm factors including strategic alliances and key customer relationships and internal firm factors such as the strategic emphasis on value creation versus value appropriation a sample of 1 095 ipos during 2000 2011 reveals evidence of myopic marketing practices in more than 37 of the sample investors seem misled during ipos bu

pharmaceutical r d spending and threats of price regulation do threats of pharmaceutical price regulation affect subsequent research and development r d spending this study uses the clinton administration s health security act hsa of 1993 as a natural experiment to study this issue we link events surrounding the hsa to pharmaceutical stock price changes and then examine the cross sectional relation between firms stock price changes and their subsequent unexpected r d spending changes re sults show that the hsa had significant negative effects on stock prices and firm level r d spending conservatively the hsa reduced r d spending by about 1 billion even though it never became law

diversification strategy and r d intensity in multiproduct firms this study provides empirical evidence that choice of diversification strategy systematically affects r d intensity in large multiproduct firms research and development intensity in dominant busin

agency models in different stages of ceo tenure the effects of stock options and board independence on r d investment this study examines how r d investment is shaped by governance devices combining the two agency models of limited competence and managerial opportunism it suggests that governance devices exert differing effects in early vs later stages of ceo tenure early in ceo tenure r d investment is reduced by stock options and board independence whereas in later stages these effects reverse r d investment is enhanced by stock options and board independence an empirical test on a sample of u s companies provides support for the hypothesized effects for policy makers this study implies that r d investment can be enhanced by setting rules and standards of good governance that take into account ceo time in office and firm context

public health insurance expansions and hospital technology adoption abstract this paper explores the effects of public health insurance expansions on hospitals decisions to adopt medical technology specifically we test whether the expansion of medicaid eligibility for pregnant women during the 1980s and 1990s affects hospitals decisions to adopt neonatal intensive care units nicus while medicaid expansion provided new insurance to a substantial number of pregnant women prior literature also finds that some newly insured women would otherwise have been covered by more generously reimbursed private sources such crowd out combined with medicaid s low reimbursement rats leads to a theoretically ambiguous net effect of medicaid expansion on a hospital s incentive to invest in technology using american hospital association data we find that on average medicaid expansion has no statistically significant effect on nicu adoption however we also find that in geographic areas where more of the newly medicaid insured may have come from the privately insured population medicaid expansion slows nicu adoption this holds true particularly when medicaid payment rates are very low relative to private payment rates our findings are consistent with prior evidence on reduced nicu adoption from increased managed care penetration we conclude by discussing the policy implications of our work for insurance expansions associated with the affordable care act

income and health spending evidence from oil price shocks health expenditures as a share of gdp in the united states have more than tripled over the past half century a common conjecture is that this is a consequence of rising income we investigate this hypothesis by instrumenting for local area income with time series variation in oil prices interacted with local oil reserves this strategy enables us to capture both partial equilibrium and local general equilibrium effects of income on health expenditures our central income elasticity estimate is 0 7 with 1 1 as the upper end of the 95 confidence interval which suggests that rising income is unlikely to be a major driver of the rising health expenditure share of gdp 2013 the president and fellows of harvard college and the massachusetts institute of technology

the role of hospital competition on treatment expenditure and outcome evidence from stroke and cardiac treatment in taiwan this article examines whether market competition affects treatment expenditure and health outcomes of stroke and cardiac treatment in taiwan our measure of treatment expenditure is the hospital expenditure paid at the index admission short term and the sum of inpatient and outpatient expenditures paid in the subsequent year long term our measure of health outcome is the probability of death in 1 and 12 months after the hospital s discharge our measure of competition follows the method developed by kessler and mcclellan that calculates the herfindal index based on the predicted patient flows using exogenous variables e g traveling distance to hospitals using data of patients hospitalized for new stroke and cardiac treatment between 1997 and 2001 in taiwan we find that an increase of market competition results in an insignificant impact on a patient s mortality in terms of treatment expenditure our results indicate that hospitals facing more competition incur higher expenditures either the short or long term expenditure finally we find evidence showing that an increase of treatment expenditure at admission is due to a raise of length of stay and treatment intensity per day as well as the usage of expensive equipment jel i11 l13 l41

price and concentration in hospital markets the switch from patient driven to payer driven competition perhaps the most widely accepted paradigm of industrial organization i o is that competition lowers prices or alternatively that price cost margins are lower in less concentrated markets 1 the applicability of this paradigm for hospital markets has been questioned for example in united states vs carilion health system and roanoke valley hospital the district and appellate courts accepted evidence that hospital prices are lower in more concentrated markets and thereby approved a merger between the two largest hospitals in a three hospital market 2 the view that competition has a weak or perverse effect on hospital prices is shared by a number of researchers 3 is a common theme in newspaper stories

medical care costs how much welfare loss hardly a week goes by without a front page newspaper article on rising health care costs and the uninsured in this article i focus mainly on costs arguing that the issue has been somewhat misconceived while the level of medical care spending in the u s is a cause for concern the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem in fact cost containment may not be as urgent as is widely supposed and some proposed cost containment policies may result in welfare losses for the insured and even increase the number of uninsured

the industrial organization of health care markets the u s health care sector is large and growing health care spending in 2011 amounted to 2 7 trillion and 18 percent of gdp approximately half of health care output is allocated via markets in this paper we analyze the industrial organization literature on health care markets focusing on the impact of competition on price quality and treatment decisions for health care providers and health insurers we conclude with a discussion of research opportunities for industrial organization economists including opportunities created by the u s patient protection and affordable care act

do firms underinvest in long term research evidence from cancer clinical trials we investigate whether private research investments are distorted away from long term projects our theoretical model highlights two potential sources of this distortion short termism and the fixed patent term our empirical context is cancer research where clinical trials and hence project durations are shorter for late stage cancer treatments relative to early stage treatments or cancer prevention using newly constructed data we document several sources of evidence that together show private research investments are distorted away from long term projects the value of life years at stake appears large we analyze three potential policy responses surrogate non mortality clinical trial endpoints targeted r d subsidies and patent design jel d92 g31 i11 l65 o31 o34

political connections and corporate environmental responsibility adopting or escaping abstract corporate environmental responsibility cer is increasingly viewed as an important business strategy by researchers investors and society as a whole while prior research has emphasized the role of social pressures firm specific factors as well as ceo characteristics in cer little attention has been paid to the impacts of political connections we propose a mechanism based framework to study how political connections affect firm s propensity to engage in cer using comprehensive environmental information disclosure data on china s listed firms augmented by unique data on political connections we find that political connections have a positive effect on cer this effect is more pronounced for state owned firms and in cities with stringent environmental regulations with respect to the channels through which political connections increase cer we further find that political connections help firms to receive government grants subsidies and tax reduction related to the environment protection and implement government environmental policies

competition and efficiency in the end stage renal disease program abstract estimated coefficients for medical service production or cost functions are subject to a competitive amenity bias which may result in the failure to identify factors that affect economic efficiency our investigation of productivity of dialysis facilities did indeed indicate both the likelihood of bias and some qualitative results these results suggest that it will be difficult to estimate cost and that variation in the level of reimbursement will in competitive markets affect the level of amenity delivered to patients incurred cost amenity and patient well being will all vary positively with the reimbursement level determining the right level of reimbursement requires a policy decision on how much total amenity society wishes to deliver to beneficiaries of public programs

opportunities and benefits as determinants of the direction of scientific research abstract scientific research and private sector technological innovation differ in objectives constraints and organizational forms scientific research may thus not be driven by the direct practical benefit to others in the way that private sector innovation is alternatively some yet largely unexplored mechanisms drive the direction of scientific research to respond to the expected public benefit we test these two competing hypotheses of scientific research this is important because any coherent specification of what constitutes the socially optimal allocation of research requires that scientists take the public practical benefit of their work into account in setting their agenda we examine whether the composition of medical research responds to changes in disease prevalence while accounting for the quality of available research opportunities we match biomedical publications data with disease prevalence data and develop new methods for estimating the quality of research opportunities from textual information and structural productivity parameters

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

horizon problem and firm innovation the influence of ceo career horizon exploitation and exploration on breakthrough innovations abstract building on labor market evaluations and legacy conservation motivation perspectives we propose a mechanism to explain the relationship between ceo career horizons and breakthrough innovations using 10 year panel data from 681 u s firms we find that firms that have a ceo with a short career horizon tend to produce fewer breakthrough innovations we also find that the relationship between ceo career horizon and breakthrough innovation is partially mediated by r d spending and also moderated by organizational learning behavior exploration vs exploitation this study highlights how a ceo s motivation to protect success in the short term affects the firm s innovativeness

does competition between hospitals improve the quality of care hospital death rates and the nhs internal market payer driven competition has been widely advocated as a means of increasing efficiency in health care markets the 1990s reforms to the uk health service followed this path we examine whether competition led to better outcomes for patients as measured by death rates after treatment following heart attacks using data that until 1999 was not publicly available in any form on hospital level death rates we find that the relationship between competition and quality of care appears to be negative greater competition is associated with higher death rates controlling for patient mix and other observed characteristics of the hospital and the catchment area for its patients however the estimated impact of competition is small jel classification i1 l8 h4

a dynamic model of quality competition with endogenous prices abstract we develop a dynamic model of price and quality competition in order to analyze the effects of competition on quality provision and to which extent an unregulated market is able to provide a socially optimal quality level our model combines a differential game approach with a hotelling spatial competition framework and our analysis applies in particular to industries such as long term care health care child care and education if providers nursing homes hospitals schools nurseries use closed loop decision rules which imply strategic interaction over time we show that although increased competition leads to higher quality in the steady state quality provision is nevertheless lower than under open loop rules and also suboptimally low from a welfare perspective thus our analysis identifies dynamic strategic interaction between competing providers as a potential source of inefficiency in quality provision

competition among hospitals the traditional view of hospital competition has posited that hospitals compete primarily along quality dimensions in the form of fancy equipment to attract admitting physicians and pleasant surroundings to entice patients price competition among hospitals is thought to be non existent this paper estimates the effects of various hospital market characteristics on hospital prices and expenses in an attempt to determine the form of hospital competition the results suggest that both price and quality competition are greater in markets that are less concentrated although the net effect of the two on prices is insignificant it appears therefore that despite important distortions hospital markets are not immune to standard competitive forces

altruism and innovation in health care abstractthe joint presence of technological change and consumption externalities is central to health care industries around the world because medical innovation drives the expansion of the health care sector and altruism seems to motivate many public subsidies although traditional economic analysis has proposed well known remedies to deal with consumption externalities and inefficient technological change in isolation it lacks clear principles for addressing them jointly we argue that standard remedies to each of the two problems are inadequate focusing on u s health care we provide illustrative calculations of the dynamic inefficiency in the level of research and development r d spending when innovators are unable to appropriate the altruistic surplus of nonconsumers we calibrate that altruistic gains amount to about a quarter of consumer surplus in the baseline scenario and that r d spending may be underprovided by as much as 60 percent

cognition capabilities and incentives assessing firm response to the fiber optic revolution this study examines how ceo cognition organizational capabilities and organizational incentives interacted to shape firm strategy during the fiber optic revolution i tested for these factors as

how do patents affect follow on innovation evidence from the human genome we investigate whether patents on human genes have affected follow on scientific research and product development using administrative data on successful and unsuccessful patent applications submitted to the us patent and trademark office we link the exact gene sequences claimed in each application with data measuring follow on scientific research and commercial investments using this data we document novel evidence of selection into patenting patented genes appear more valuable prior to being patented than non patented genes this evidence of selection motivates two quasi experimental approaches both of which suggest that on average gene patents have had no quantitatively important effect on follow on innovation

performance feedback and firm risk taking the moderating effects of ceo and outside director stock options we contribute to the behavioral theory of the firm and the behavioral agency model by developing a theoretical framework that predicts the differential interaction effects of performance feedback and values of stock option grants of multiple agents on firm risk taking we explain how chief executive officers ceos versus outside directors awarded with stock option grants perceive negative or positive deviations from prior performance we argue that in a negative attainment discrepancy context high values of option grants will increase the risk aversion of ceos who already bear excessive employment and compensation risks resulting in less risk taking however it will enhance the risk taking propensity of influential outside directors who increase monitoring and support for risky projects because their risk preferences are better aligned with those of shareholders in a positive attainment discrepancy context high values of option grants will amplify risk aversion in both ceos and outside directors who

is hospital competition socially wasteful we study the consequences of hospital competition for medicare beneficiaries heart attack care from 1985 to 1994 we examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes in the 1980s the welfare effects of competition were ambiguous but in the 1990s competition unambiguously improves social welfare increasing hmo enrollment over the sample period partially explains the dramatic change in the impact of hospital competition

is hospital competition wasteful stable url http links jstor org sici sici 0741 6261 28199222 2923 3a2 3c247 3aihcw 3e2 0 co 3b2 zthe rand journal of economics is currently published by the rand corporation your use of the jstor archive indicates your acceptance of jstor s terms and conditions of use available athttp www jstor org about terms html jstor s terms and conditions of use provides in part that unless you have obtainedprior permission you may not download an entire issue of a journal or multiple copies of articles and you may use content inthe jstor archive only for your personal non commercial use please contact the publisher regarding any further use of this work publisher contact information may be obtained athttp www jstor org journals rand html each copy of any part of a jstor transmission must contain the same copyright notice that appears on the screen or printedpage of such transmission the jstor archive is a trusted digital repository providing for long term preservation and access to leading academicjournals and scholarly literature from around the world the archive is supported by libraries scholarly societies publishers and foundations it is an initiative of jstor a not for profit organization with a mission to help the scholarly community takeadvantage of advances in technology for more information regarding jstor please contact support jstor org http www jstor orgfri jan 4 14 10 49 2008

r d and ceo departure date do financial incentives make ceos more opportunistic the purpose of this article is to examine whether research and development r d expenditure is biased downward because of self serving behavior of highly incentivized managers this offers an insight into the general relationship between incentives and opportunism using instrumental variables and panel data methods for a sample of high r d spenders in the uk we examine whether r d is reduced in cases of imminent departure of the ceo results show evidence for this but only for the sample above the median in intensity of stock and options in the compensation package this suggests that opportunism is enhanced by inappropriately strong incentives the main results are robust to the inclusion of a number of corporate governance variables jel classification g30 o30

the aggregate effects of health insurance evidence from the introduction of medicare this paper investigates the effects of market wide changes in health insurance by examining the single largest change in health insurance coverage in american history the introduction of medicare in 1965 i estimate that the impact of medicare on hospital spending is over six times larger than what the evidence from individual level changes in health insurance would have predicted this disproportionately larger effect may arise if market wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles i present some evidence of these types of effects a back of the envelope calculation based on the estimated impact of medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period

necessity is the mother of invention input supplies and directed technical change this study provides causal evidence that a shock to the relative supply of inputs to production can 1 affect the direction of technological progress and 2 lead to a rebound in the relative price of the input that became relatively more abundant the strong induced bias hypothesis i exploit the impact of the u s civil war on the british cotton textile industry which reduced supplies of cotton from the southern united states forcing british producers to shift to lower quality indian cotton using detailed new data i show that this shift induced the development of new technologies that augmented indian cotton as these new technologies became available i show that the relative price of indian u s cotton rebounded to its pre war level despite the increased relative supply of indian cotton this is the first paper to establish both of these patterns empirically lending support to the two key predictions of leading directed technical change theories

preventives versus treatments preventives are sold ex ante before disease status is realized while treatments are sold ex post even if the mean of the ex ante distribution of consumer values is the same as that ex post the shape of the distributions may differ generating a difference between the surplus each product can extract if for example consumers differ only in ex ante disease risk then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers having contracted the disease no longer differ in disease risk we show that the ratio of preventive to treatment producer surplus can be arbitrarily small in particular when the distribution of consumer values has a zipf shape and the disease is rare the firm s bias toward treatments can be reversed for example if the source of private information is disease severity learned ex post the difference between the producer surplus earned from the products can result in distorted rd the deadweight loss from this distortion can be as large as the entire producer surplus difference calibrations for hiv and heart attacks based on risk factors in the u s population suggest that the distribution of disease risk is sufficiently zipf similar to generate substantial differences between producer surplus from preventives and treatments empirically we find that proxies for the zipf similarity of the disease risk distribution are associated a significantly lower likelihood of vaccine development but not drug development jel codes o31 l11 i18 d42

who participates in r d subsidy programs the case of spanish manufacturing firms abstract empirical evidence on the effectiveness of r d subsidies to firms has produced mixed results so far one possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries leading to different outcomes in terms of the induced additional private effort here we focus on the participation stage using a sample of spanish firms we test for differences across agencies and industries our results suggest that firms in the same industry face different hurdles to participate in different agencies programs that participation patterns may reflect a combination of agency goals and that patterns differ across high tech and low tech industries

market size and innovation effects of medicare part d on pharmaceutical research and development recent evidence suggests that medicare part d increased prescription drug use among seniors and increased pharmaceutical firms revenues from sales previous studies also indicate that increases in market size induce pharmaceutical innovation this paper assesses the impact of the medicare part d legislation on pharmaceutical research and development r d using time series data on the number of drugs entering preclinical and clinical development by therapeutic class and phase we find that the passage and implementation of medicare part d is associated with significant increases in pharmaceutical r d for therapeutic classes with higher medicare market share

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

economic policy uncertainty ceo characteristics and firm r d expenditure a bayesian analysis this paper applies a linear bayesian regression model to study the effects of economic policy uncertainty epu and chief executive officer ceo characteristics on firm research and development r

the distortionary effects of government procurement evidence from medicaid prescription drug purchasing in 2003 the federal state medicaid program provided prescription drug coverage to more than 50 million people to determine the price that it will pay for each drug medicaid uses the average private sector price when medicaid is a large part of the demand for a drug this creates an incentive for its maker to increase prices for other health care consumers using drug utilization and expenditure data for the top 200 drugs in 1997 and in 2002 we investigate the relationship between the medicaid market share mms and the average price of a prescription our estimates imply that a 10 percentage point increase in the mms is associated with a 7 to 10 percent increase in the average price of a prescription in addition the medicaid rules increase a firm s incentive to introduce new versions of a drug in order to raise price we find empirical evidence that firms producing newer drugs with larger sales to medicaid are more likely to introduce new versions taken together our findings suggest that government procurement rules can alter equilibrium price and product proliferation in the private sector

the market impacts of pharmaceutical product patents in developing countries evidence from india in 2005 as the result of a world trade organization mandate india implemented a patent reform for pharmaceuticals that was intended to comply with the 1995 trade related aspects of intellectual property rights trips exploiting variation in the timing of patent decisions we estimate that a molecule receiving a patent experienced an average price increase of just 3 6 percent with larger increases for more recently developed molecules and for those produced by justone firm when the patent system began our results also show little impact on quantities sold or on the number of pharmaceutical firms operating in the market

the effects of market structure and bargaining position on hospital prices ppos and hmos have gained widespread acceptance due in part to the belief that excess capacity and competitive market conditions can be leveraged to negotiate lower prices with health care providers we investigated prices obtained in different types of markets by the largest ppo in california our findings indicate that greater hospital competition leads to lower prices furthermore as the importance of a hospital to the ppo in an area increases the price rises substantially our testing of alternative methods for defining hospital geographic markets reveals that the common practice of using counties to define the market leads to an underestimate of the price increasing effects of a merger

r d policy agency costs and innovation in personalized medicine the orphan drug act oda was designed to spur the development of drugs for rare diseases in principle its design also incentivizes pharmaceutical firms to develop drugs for rare subdivisions of more prevalent diseases i find that in response to this incentive firms develop drugs for oda qualifying subdivisions of non rare diseases the impact in these tailored drug markets represents half of the total r d response to the oda i also find that 10 percent of the innovation in subdivided disease drugs induced by the oda would have been conducted without the policy while modest in size this inefficiency suggests that agency problems should be considered when designing innovation policy

ownership structure investment and the corporate value an empirical analysis this paper examines the relation among ownership structure investment and corporate value focusing on whether ownership structure affects investment ordinary least squares regression results suggest that ownership structure affects investment and therefore corporate value however simultaneous regression results indicate that the endogeneity of ownership may affect these inferences suggesting that investment affects corporate value which in turn affects ownership structure the evidence shows that corporate value affects ownership structure but not vice versa these findings raise questions regarding the assumption that ownership structure is exogenously determined and bring into question the results in studies that treat ownership structure as exogenous

interpreting pre trends as anticipation impact on estimated treatment effects from tort reform abstract while conducting empirical work researchers sometimes observe changes in outcomes before adoption of a new policy the conventional diagnosis is that treatment is endogenous this observation is also consistent however with anticipation effects that arise naturally out of many theoretical models this paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects it provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects expectations are unobservable finally this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them interpreting pre trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation

board diversity and firm performance evidence from the u k smes this study examines the relationship between board diversity and firm performance in small and medium sized enterprises smes in the u k in particular we investigate the role of gender and age

government spending composition technical change and wage inequality in this paper we argue that government spending played a significant role in stimulating the wave of innovation that hit the u s economy in the late 1970s and in the 1980s as well as the simultaneous increase in inequality and in education attainments since the late 1970s u s policymakers began targeting commercial innovations more directly and explicitly we focus on the shift in the composition of public demand toward high tech goods which by increasing the market size of innovative firms functions as a de facto innovation policy tool we build a quality ladders non scale growth model with heterogeneous industries and endogenous supply of skills and show that an increase in the technological content of public spending stimulates r d raises the wage of skilled workers and at the same time stimulates human capital accumulation a calibrated version of the model suggests that government policy explains between 12 and 15 of the observed increase in wage inequality in the period 1976 1991 jel e62 j31 o33 o41

the effect of competitive pressure on charity hospital responses to price shopping in california abstract since higher charges to private patients are a major source of financing for hospital care to the uninsured increased price shopping by private payers may mean that hospitals are less able to provide such care i study the effect of increased price shopping on california hospital markets over the 1984 1988 period i find that there was a large fall in net private revenues and net income in the least concentrated hospital markets in the state after the advent of price shopping perhaps as a result care to the uninsured fell dramatically in these markets as well relative to more concentrated markets