30(40)
services are performed on average during a year, the effects corresponds
to a redistribution from providers to patients of 336,000 SEK and 431,000
SEK respectively. The price decrease for follow-on services fall in the
range 0.01% to 0.07%, corresponding to a redistribution from providers
to patients in the range 282,000 SEK to 1.9 million SEK. Moreover, an
increase of one extra clinics within 1 kilometer, would decrease prices
for the first-stage services by up to 0.56%. This corresponds to a price
decrease with about 3.4 SEK and a redistribution from sellers to buyers
of 2.6 million SEK on average per year.
Furthermore the policy simulations suggest that there is room for price
decreases. This implies that prices on the Swedish dental care market
are set above the competitive level and that increased competition would
increase consumer welfare by lowering prices. While all simulation results
point in the same direction, it is noteworthy that the economic significance
of the welfare improvement varies depending on which reduced form
estimate the simulation is based on.
In sum, the reduced form results, suggests that competition has an effect
on the
difference
between first-stage services and follow-on services. These
results are robust across different definitions of services and specifications.
Combined with the policy simulations, the conclusion is that i) the absolute
effect of competition on prices is negative for both kind of services and ii)
competition on average has greater negative effects for first-stage services
compared to follow-on services.
All effects should be interpreted as short-term effects of competition as the
identifying variation is changes in competition from one year to the next. It
is therefore interesting that providers show evidence of strategic behavior
in their price setting. Furthermore, substantial effects of competition on
prices over time cannot be ruled out.
An important result in this paper is that competition indeed has different
effects on prices for different types of services. This is a feature with
competition on health care markets that was pointed out several decades
ago by Pauly (1978), but has been widely overlooked in the empirical
literature.
