Avoiding Regulation: Evidence from Nursing Homes

with Alden Cheng
Working Paper
Recent draft available here. BibTeX citation available here.

Abstract: We study a minimum staffing requirement for California nursing homes with at least 100 beds. We document extensive bunching in response to the regulation: facilities in California are 158 times as likely to be just below the regulatory threshold compared to just above. Using a novel method of estimating the effect of crossing a treatment threshold in the presence of manipulation of treatment status, we demonstrate that the regulation has little effect on staffing for those facilities subject to it. Moreover, size distortions induced by the regulation limit access, particularly for disadvantaged patients, illustrating an unintended consequence of threshold-based regulations.