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Testing a Roy Model with Productivity Spillovers: Evidence from the Treatment of Heart Attacks

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  • Amitabh Chandra
  • Douglas Staiger

Abstract

Productivity spillovers are often cited as a reason for geographic specialization in production. A large literature in medicine documents specialization across areas in the use of surgical treatments, which is unrelated to patient outcomes. We show that a simple Roy model of patient treatment choice with productivity spillovers can generate these facts. Our model predicts that high-use areas will have higher returns to surgery, better outcomes among patients most appropriate for surgery, and worse outcomes among patients least appropriate for surgery. We find strong empirical support for these and other predictions of the model, and decisively reject alternative explanations commonly proposed to explain geographic variation in medical care.

Suggested Citation

  • Amitabh Chandra & Douglas Staiger, 2004. "Testing a Roy Model with Productivity Spillovers: Evidence from the Treatment of Heart Attacks," NBER Working Papers 10811, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10811
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    Cited by:

    1. Burke, Mary A. & Fournier, Gary M. & Prasad, Kislaya, 2010. "Geographic variations in a model of physician treatment choice with social interactions," Journal of Economic Behavior & Organization, Elsevier, vol. 73(3), pages 418-432, March.
    2. Abe C. Dunn & Adam Shapiro & Eli Liebman, 2011. "Geographic Variation in Commercial Medical Care Expenditures: A Decomposition Between Price and Utilization," BEA Working Papers 0075, Bureau of Economic Analysis.
    3. Amitabh Chandra & Jonathan S. Skinner, 2011. "Technology Growth and Expenditure Growth in Health Care," NBER Working Papers 16953, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • J0 - Labor and Demographic Economics - - General

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