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The soft budget constraint syndrome in the hospital sector

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  • János Kornai

    ()
    (Harvard University and Collegium Budapest
    Central European University, Budapest, Hungary)

Abstract

Research to date has focused mainly on the soft budget constraint syndrome in the corporate sector and in the credit system. This article concentrates on the hospital sector. It describes the motivations and the contradictory nature of the behaviour of the patient, the physician, the hospital director, the politician and the hospital owner. The motivations explain the reasons behind the strong inclination to overspend and the tendency of softening budgetary limits. The burden of overspending and debt is pushed upward at each level of the decision-making and financing processes. This article covers the relationship between the various ownership types (state, non-profit and for-profit non-state ownership types) and the soft budget constraint syndrome. Finally, it looks at the phenomenon from normative aspects: the favourable and unfavourable consequences of the hardening of the budgetary limit and how normative dilemmas are reflected in the minds of the participants of the events.

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Bibliographic Info

Article provided by Akadémiai Kiadó, Hungary in its journal Society and Economy.

Volume (Year): 31 (2009)
Issue (Month): 1 (June)
Pages: 5-31

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Handle: RePEc:aka:soceco:v:31:y:2009:i:1:p:5-31

Note: I cooperated closely with Csaba Dózsa in the collection and processing of the Hungarian data used in the study. His expertise and knowledge helped me a great deal in understanding the problems of the Hungarian situation. The Hungarian data were collected under his direction with the involvement of Nikoletta Malbaski. I am grateful for their thorough and careful work and substantial proposals. I have also received notable advice from professor Karen Eggleston, one of my former students and co-authors. I also thank Zsuzsa Dániel, Péter Forgács, Gyula Kincses, Mária Lipták, Melinda Makár and Péter Mihalicza for their valuable support. Eszter Nagy also provided untiring help to me in the collection of literature and editing of the study, just as she did in my previous works.
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Web page: http://www.akkrt.hu

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Postal: Akadémiai Kiadó Zrt., Prielle K. u. 21-35. Budapest, 1117, Hungary
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Related research

Keywords: Hungary; soft budget constraint; hospitals;

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References

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  1. Dewatripont, M & Maskin, E, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 541-55, October.
  2. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361.
  3. Eggleston, Karen & Shen, Yu-Chu, 2011. "Soft budget constraints and ownership: Empirical evidence from US hospitals," Economics Letters, Elsevier, vol. 110(1), pages 7-11, January.
  4. Magnussen, Jon & Hagen, Terje P. & Kaarboe, Oddvar M., 2007. "Centralized or decentralized? A case study of Norwegian hospital reform," Social Science & Medicine, Elsevier, vol. 64(10), pages 2129-2137, May.
  5. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-62, December.
  6. David Rae, 2005. "Getting Better Value for Money from Sweden's Healthcare System," OECD Economics Department Working Papers 443, OECD Publishing.
  7. Jonathan A. Rodden & Gunnar S. Eskeland (ed.), 2003. "Fiscal Decentralization and the Challenge of Hard Budget Constraints," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182297, December.
  8. Yu-Chu Shen & Karen Eggleston, 2009. "The effect of soft budget constraints on access and quality in hospital care," International Journal of Health Care Finance and Economics, Springer, vol. 9(2), pages 211-232, June.
  9. Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, vol. 29(1), pages 87-109, January.
  10. Lindrooth, Richard C. & Lo Sasso, Anthony T. & Bazzoli, Gloria J., 2003. "The effect of urban hospital closure on markets," Journal of Health Economics, Elsevier, vol. 22(5), pages 691-712, September.
  11. Dewatripont, Mathias & Tirole, Jean, 1996. "Biased principals as a discipline device," Japan and the World Economy, Elsevier, vol. 8(2), pages 195-206, June.
  12. Massimo Bordignon, 2000. "Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy," Research Department Publications 3099, Inter-American Development Bank, Research Department.
  13. Massimo Bordignon & Gilberto Turati, 2003. "Bailing Out Expectations and Health Expenditure in Italy," CESifo Working Paper Series 1026, CESifo Group Munich.
  14. Eggleston, Karen, 2008. "Soft budget constraints and the property rights theory of ownership," Economics Letters, Elsevier, vol. 100(3), pages 425-427, September.
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Citations

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Cited by:
  1. Massimiliano Piacenza & Gilberto Turati, 2010. "Does Fiscal Discipline towards Sub-national Governments Affect Citizens’ Well-being? Evidence on Health," Working papers 12, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  2. Xiao Xian HUANG & Aurore PELISSIER & Jacky MATHONNAT & Martine AUDIBERT & Anning MA, 2011. "Health Insurance Reform and Efficiency of Township Hospitals in Rural China: An Analysis from Survey Data," Working Papers 201111, CERDI.
  3. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2013. "Hospital Competition with Soft Budgets," CESifo Working Paper Series 4073, CESifo Group Munich.
  4. Karen Eggleston & Yu-Chu Shen & Mingshan Lu & Congdong Li & Jian Wang & Zhe Yang & Jing Zhang, 2009. "Soft budget constraints in China: Evidence from the Guangdong hospital industry," International Journal of Health Care Finance and Economics, Springer, vol. 9(2), pages 233-242, June.
  5. Yu-Chu Shen & Karen Eggleston, 2009. "The effect of soft budget constraints on access and quality in hospital care," International Journal of Health Care Finance and Economics, Springer, vol. 9(2), pages 211-232, June.

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