Essays on Agglomeration, Access To Medical Services, And the Real Estate Market

This dissertation comprises three papers that study how external economies of scale help to explain geographic variation in access to medical services as well as potential implications on the real estate market. Specifically, the first two papers examine whether an increased concentration of the hospital service industry promotes productivity in treating patients and if so, what are the specific channels through which agglomeration economies might take place in the health care industry. The third paper explores how the productivity variation is reflected in the real estate market. Chapter 2 examines two factors that help to explain geographic variation in health outcomes. The first factor concerns proximity to medical services. The second factor is state-specific health care policy that may impede access to nearby medical services. Three key findings are obtained. First, the effect of local doctors on reducing mortality rates of various diseases in a county attenuates with distance. Second, at approximately the same distance, in-state doctors contribute more to lowering mortality rates in the primary county than do out-of-state doctors. Third, the lesser impact of nearby out-of-state doctors is amplified when the primary state adopts more stringent policies that restrict entry of out-of-state physicians. This evidence is consistent with labor market pooling as one of the specific channels through which agglomeration economies affect productivity. Chapter 3 addresses two related questions that help to explain geographic variation in access to medical services. The first question examines the existence of agglomeration economies in the hospital service industry. The second considers whether the sharing of intermediate inputs contributes to spillovers from spatial concentration of hospital services. Three key findings are obtained. First, hospitals in more concentrated areas are more likely to outsource intermediate services to specialized intermediate service suppliers. This suggests that agglomeration economies exist in the hospital service industry and are generated in part through the sharing of intermediate inputs. Second, the presence of nearby small hospitals increases the tendency to outsource, consistent with a Chinitz effect identified elsewhere in the literature. Third, the agglomeration effect attenuates geographically. Chapter 4 replicates and extends a paper by Holly, Pesaran, and Yamagata (2010). Their paper uses a panel of 49 states over the period of 1975 to 2003 to show that state-level real housing prices are driven by economic fundamentals, such as real per capita disposable income, as well as by common shocks, such as changes in interest rates, oil prices, and technological change. They apply the common correlated effects (CCE) estimator of Pesaran (2006) which takes into account spatial interactions that reflect both geographical proximity and unobserved common factors. This chapter replicates their results using a panel of 384 Metropolitan Statistical Areas (MSAs) observed over the period of 1975 to 2010. Our replication shows that their results are fairly robust to the more geographically refined cross-section units, and to the updated period of study