In many sectors, pay is regulated to be equal across heterogeneous geographical labor markets. When the competitive outside wage is higher than the regulated wage, there are likely to be falls in quality. We exploit panel data from the population of English hospitals in which regulated pay for nurses is essentially flat across the country. Higher outside wages significantly worsen hospital quality as measured by hospital deaths for emergency heart attacks. A 10 percent increase in the outside wage is associated with a 7 percent increase in death rates. Furthermore, the regulation increases aggregate death rates in the public health care system.

Abstract We study the effect of Internet diffusion on childbirth procedures performed in England between 2000 and 2011. We show that broadband Internet access increased cesarean sections (C-sections): mothers living in areas with better Internet access are 2.5% more likely to obtain a C-section. The effect is driven by first-time mothers who are 6% more likely to obtain a C-section. The increased C-section rate is not accompanied by changes in health care outcomes; thus health care costs increased with no corresponding medical benefits. We show evidence documenting the growing importance of the Internet as a source of health-related information.

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.