International accreditation, linguistic proximity and trade in medical services

Abstract

The recent growth in the globalization of medical services has attracted broad attention from scholars and policymakers. The intimacy and risk associated with many medical services makes these markets especially sensitive to trade barriers, transaction costs and asymmetric information. This paper uses a gravity model to investigate the factors associated with the global pattern of bilateral trade in medical services. Using data from the United Nations International Trade in Services Database, we differentiate between trade flows in which the recipient travels to the service provider, ‘medical tourism,’ and those trade flows in which the service is delivered to the recipient, ‘other health services.’ Our findings indicate that, after controlling for various economic, historical and geographic linkages, linguistic proximity and international accreditation are not significant predictors of the bilateral pattern of medical tourism, though they are associated with greater trade in other health services. We argue the key difference is that trade in other health services, including medical transcription, diagnostic analysis and laboratory services, is akin to trade in intermediate inputs. The medical service providers contracting for these services are especially sensitive to risk and have strong incentives to monitor quality. By contrast, medical tourism is a market in which patients do not have strong incentives to engage in costly monitoring or information gathering. Providers seeking to market their services to patients abroad have mitigated the effects of linguistic dissimilarity and asymmetric information by exploiting the strong complementarities between medical and non-medical tourism services.