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Market Size and Trade in Medical Services

Institute Working Paper 68 | Published April 4, 2023

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Jonathan I. Dingel Short-Term Visitor
Joshua D. Gottlieb University of Chicago and NBER
Maya Lozinski University of Chicago
Pauline Mourot Chicago Booth
Market Size and Trade in Medical Services


We measure the importance of increasing returns to scale and trade in medical services. Using Medicare claims data, we document that “imported” medical care—services produced by a medical provider in a different region—constitute about one-fifth of US healthcare consumption. Larger regions specialize in producing less common procedures, which are traded more. These patterns reflect economies of scale: larger regions produce higher-quality services because they serve more patients. Because of increasing returns and trade costs, policies to improve access to care face a proximity-concentration tradeoff. Production subsidies and travel subsidies can impose contrasting spillovers on neighboring regions.