Session 8 - Seminar on research models and methods in economics

Sandrine Noblet, Université de Corse
"When does centralization improve patient welfare? A New Economic Geography model of specialized care"

The spatial organization of specialized healthcare services raises a fundamental policy trade-off between equity of access and productive efficiency. In highly specialized healthcare services, minimum activity thresholds, scale economies, and strong technological complementarities-well documented in the empirical literature on volume-outcome relationships-constrain the feasibility of spatial dispersion, while public policies frequently emphasize geographical proximity and territorial equity. This paper investigates under which conditions the spatial concentration of specialized care, such as oncology, can improve patient welfare despite longer travel distances.
We develop a partial equilibrium spatial model inspired by the New Economic Geography and vertical linkage frameworks à la Venables (1996). Specialized healthcare services, such as cancer care, are modeled as a final production stage relying on a differentiated set of intermediate diagnostic and treatment services (e.g. imaging, molecular biology, radiotherapy), forming an integrated structure of vertically linked diagnostic and treatment services. The local diversity of these intermediate services increases with local demand. Patients are spatially distributed, face distance-related access costs, and choose where to receive specialized treatment. Care quality and productive efficiency depend endogenously on the locally available diversity of intermediate services.
The model compares a spatially dispersed organization of specialized care, characterized by limited local input diversity and lower productive efficiency, to a fully concentrated structure supporting a richer ecosystem of intermediate services. We show that spatial concentration can dominate in terms of patient welfare when quality and efficiency gains generated by input diversity more than compensate for the additional travel costs borne by patients. The analysis highlights threshold effects, akin to core-periphery outcomes, whereby dispersion becomes welfare-dominated once minimum scale requirements and vertical linkage effects are sufficiently strong. Larger patient basins then sustain a disproportionately diversified care infrastructure, reinforcing specialization and quality.
Our results provide a theoretical foundation for the well-documented trade-off between access and specialization in highly specialized care. They suggest that equity in access may be more efficiently pursued by reducing patients' mobility costs-through transport reimbursement or organizational support-rather than by dispersing production below efficient scale. The framework offers guidance for the spatial planning of specialized healthcare services.