Competition and Quality: Evidence from the NHS Internal Market 1991–9*


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     We are grateful to the MRC-funded Health Services Research collaboration for access to the data on AMI death rates, and to Davidson Ho for all his help in providing the data. We are grateful to the Leverhulme Trust for funding. We have benefited from the comments of three referees and seminar participants at the Universities of ANU, Berkeley, Boston, Bristol, Carnegie Mellon, Essex, Harvard, and Melbourne and the 15th Health Econometrics and Economics conference and from discussions with Martin Gaynor. All errors are our responsibility.


This article exploits policy change by the UK government to identify the impact of competition on quality. It uses differences in competition over time and space to examine the impact of competition in an environment with limited quality signals in which hospitals competed mainly on price. Using AMI mortality as a measure of hospital quality we find that the relationship between competition and this measure of quality is negative. We also find that competition reduced waiting times. Our results indicate that hospitals in competitive markets reduced unmeasured and unobserved quality in order to improve measured and observed waiting times.