TY - JOUR AU - Bloom,Nicholas AU - Propper,Carol AU - Seiler,Stephan AU - Reenen,John Van TI - The Impact of Competition on Management Quality: Evidence from Public Hospitals JF - National Bureau of Economic Research Working Paper Series VL - No. 16032 PY - 2010 Y2 - May 2010 UR - http://www.nber.org/papers/w16032 L1 - http://www.nber.org/papers/w16032.pdf N1 - Author contact info: Nicholas Bloom Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/725-3266 Fax: 650/725-5702 E-Mail: nbloom@stanford.edu Carol Propper Imperial College Business School South Kensington Campus London SW7 2AZ, United Kingdom E-Mail: carol.propper@bristol.ac.uk Stephan Seiler Stanford GSB Knight Management Center 655 Knight Way Stanford, CA 94305 E-Mail: sseiler@stanford.edu John Van Reenen Department of Economics London School of Economics Centre for Economic Performance Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 00 44 207/955-6976 Fax: 00 44 207/955-6848 E-Mail: j.vanreenen@lse.ac.uk AB - In this paper we examine the causal impact of competition on management quality. We analyze the hospital sector where geographic proximity is a key determinant of competition, and English public hospitals where political competition can be used to construct instrumental variables for market structure. Since almost all major English hospitals are government run, closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment. We find that management quality - measured using a new survey tool - is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions (AMI). More importantly, we find that higher competition (as indicated by a greater number of neighboring hospitals) is positively correlated with increased management quality, and this relationship strengthens when we instrument the number of local hospitals with local political competition. Adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10.7% reduction in heart-attack mortality rates. ER -