TY  - JOUR
AU  - Cutler,David M.
AU  - Huckman,Robert S.
AU  - Kolstad,Jonathan T.
TI  - Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15214
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15214
L1  - http://www.nber.org/papers/w15214.pdf
N1  - Author contact info:
David M. Cutler
Department of Economics
Harvard University
1875 Cambridge Street
Cambridge, MA  02138
Tel: 617/496-5216
Fax: 617/496-8951
E-Mail: dcutler@harvard.edu

Robert Huckman
435 Morgan Hall
Harvard Business School
Boston, MA  02163
Tel: 617/495-6649
E-Mail: rhuckman@hbs.edu

Jonathan T. Kolstad
The Wharton School
University of Pennsylvania
306 Colonial Penn Center
3641 Locust Walk
Philadelphia, PA 19104
Tel: 215/573-9075
E-Mail: jkolstad@wharton.upenn.edu
AB  - Prior studies suggest that, with elastically supplied inputs, free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of high-quality inputs, as oligopolistic firms underuse these inputs when entry is constrained. We assess these predictions by examining how the 1996 repeal of certificate-of-need (CON) legislation in Pennsylvania affected the market for cardiac surgery in the state. We show that entry led to a redistribution of surgeries to higher-quality surgeons and that this entry was approximately welfare neutral.
ER  -