Choice in public services is controversial. We exploit a reform in the English National Health Service to assess the effect of removing constraints on patient choice. We estimate a demand model that explicitly captures the removal of the choice constraints imposed on patients. We find that, post-removal, patients became more responsive to clinical quality. This led to a modest reduction in mortality and a substantial increase in patient welfare. The elasticity of demand faced by hospitals increased substantially post-reform and we find evidence that hospitals responded to the enhanced incentives by improving quality. This suggests greater choice can raise quality.
Source: American Economic Association