This paper examines the cost efficiency in the nursing home industry, an issue of concern to Swiss policy makers because of the explosive growth of national expenditure on elderly care and the aging of the population. A stochastic cost frontier model has been applied to a panel of 1780 observations from 356 nursing homes operating over 1998-2002 in Switzerland. We compare the estimation results from different econometric techniques focusing on the specification of unobserved heterogeneity across firms. The potential effects of such unobserved factors on the estimation results and their interpretation have been discussed. The findings suggest that the economies of scale are an important potential source of cost reduction in a majority of Swiss nursing homes. Moreover the average performance of a representative nursing home is very close to the estimated best practice.
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Volume (Year): 144 (2008) Issue (Month): III (September) Pages: 359-378 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
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