Chapter

Understanding Agglomerations in Health Care

Edited by Katherine Baicker and Amitabh Chandra

in Agglomeration Economics

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226297897
Published online February 2013 | e-ISBN: 9780226297927 | DOI: http://dx.doi.org/10.7208/chicago/9780226297927.003.0008
Understanding Agglomerations in Health Care

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Analysis of the health care sector provides a valuable window into the causes of variation in productivity across areas and the role of agglomeration in generating innovation and efficiency. Understanding the drivers of productivity differences across areas is crucial to designing effective public policies to promote growth and efficient use of resources. The agglomeration economies literature explores the positive link between productivity and city size or density: cities, by virtue of their density, may facilitate the generation, transmission, and acquisition of new ideas. This chapter concerns the drivers of differences in medical sector productivity to understand agglomeration economies better, particularly the role that information spillovers play in making some places more productive. This investigation into variation in the use of high-value, low-cost health care and high-cost, low-value health care has yielded a number of surprising facts. First, there is a large variation in the use of both innovations, but with different patterns across areas. Second, hospitals seem to learn from their neighbors about both forms of care at similar rates. These findings thus have implications both for the optimal design of public subsidization of quality-improving investment and for payments for lower-value care through public insurance programs such as Medicare.

Keywords: health care; agglomeration economies; information spillovers; medical sector; public policies

Chapter.  9874 words.  Illustrated.

Subjects: Microeconomics

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