Product Safety Regulation and Technology Adoption: Evidence from CT Scanners

• In Event: AI in Health Systems and Healthcare Innovation

Abstract

How do product safety regulations affect technology adoption? While such policy tools are typically designed to mitigate risk and protect patients, their impact on firms’ incentives to adopt new technologies remains theoretically ambiguous. On the one hand, stricter regulations may increase compliance costs, discourage investment, and slow the diffusion of new technologies. On the other hand, by raising the minimum standard of acceptable performance, they may accelerate the adoption of higher-quality and safer technologies, particularly when older capital becomes relatively more costly to operate.In this paper, I provide new empirical evidence on this question by studying radiation safety regulations in the context of computed tomography (CT) scanners. CT imaging is widely used in modern healthcare but exposes patients to ionizing radiation, making safety regulation particularly salient. I construct a novel dataset that combines administrative records from the U.S. Food and Drug Administration (FDA) with detailed information on state-level radiation quality assurance policies. This dataset allows me to track the diffusion of different generations of CT scanner technologies across local markets over time.Leveraging the staggered implementation of radiation safety regulations across states, I implement a difference-in-differences research design to identify the causal impact of safety standards on technology adoption. The empirical results show that the introduction of quality assurance programs leads to a statistically significant increase in the adoption of digital CT scanners and scanners equipped with advanced X-ray control features at the city level. These effects are economically meaningful, persist over time, and are robust to a wide range of specifications and alternative samples.I further explore the mechanisms underlying these findings. The evidence suggests that safety regulations raise the relative cost of operating older, less efficient machines, thereby incentivizing providers to upgrade to newer technologies that reduce radiation exposure and improve patient safety. Meanwhile, I find little support for alternative explanations such as upstream manufacturers’ responses or patients’ awareness.Taken together, these results indicate that product safety regulation can play a central role in shaping the direction of technological change. Rather than merely constraining harmful practices, such policies can actively promote the diffusion of safer, higher-quality medical technologies. More broadly, the findings highlight how well-designed regulation can align private incentives with social objectives, encouraging innovation that enhances both efficiency and patient welfare.

Author

• Yiyu Xing, University of California - Los Angeles
  Presenting Author