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Gaining from Hospital Competition: Evidence from China

*Jie Pan, Sichuan University 


This paper analyzes the impact of competition on quality and price in China’s hospital industry. It uses differences in competition over time and across region to identify the impact of competition in an environment with partly regulated price in which hospitals competed both on quality and price. Using both provincial level (from 2002 to 2009) and individual level (from 2007 to 2010) data, we find a strongly positive relationship between competition and quality measures. We also find that competition reduced outpatient cost. Our results indicate that hospitals in competitive markets tended to improve quality and reduce price.