Thus do all. Social interactions in inappropriate behavior for childbirth services in a highly decentralized healthcare system

Empirical evidence supports the conjecture that social interactions among agents can produce both positive and negative effects. We build on this literature by exploring the role of social interactions in the hospital sector using the large incidence of cesarean sections, usually considered an inappropriate outcome in the childbirth service. In doing so, we lay out a simple model of hospitals’ behavior where the effect of peers’ behavior emerges simply by sharing the same regional health authority responsible for auditing inappropriate behavior. In this setting, enforcement congestion induces a peer effect among hospitals that could make inappropriate behaviors more likely and, as a result, could increase the excess variance among regions. Then, using a unique dataset of Italian hospitals and 2007-2012 cesarean data, we empirically investigate whether the behavior of each hospital is affected by the behavior of hospitals within the same region. Our empirical findings show a significant and strong presence of peer effects among hospitals.