Specialization and Matching in Professional Services Firms

Economic theory indicates that firms can match workers to jobs and promote productivity-enhancing specialization better than markets, yet little data exists. We empirically test whether firms enhance matching and specialization in the context of obstetrics. We then examine whether consumers benefit from this. We find that high-risk patients in group practices match with specialists more than patients of solo physicians, and this improves patients’ health outcomes. Matching based on a patient’s clinical need for a cesarean section delivery and a physician’s cesarean section skill also occurs, but less extensively. These results support the hypothesis that firms facilitate matching and specialization. JEL: D83, I12, J44, L15, L25 Acknowledgements: We appreciate the numerous insights of the editor and two reviewers, as well as David Bradford, David Meltzer, Doug Staiger, Jonathan Skinner, Michael Waldman, and seminar participants at NBER, Syracuse University, the 2005 Annual Health Economics Conference, the 2006 American Society of Health Economists conference, and the 2007 American Economic Association annual meeting. Sindhu Srinivas provided valuable insights about the clinical aspects of obstetrics.