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Stochastic cost frontier and cost inefficiency of Japanese hospitals: a panel data analysis

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  • Atsushi Fuj
  • Makoto Ohta

Abstract

This letter considers the following two questions: How much are the estimates of the parameters of stochastic cost frontier and cost inefficiency of Japanese hospitals affected (1) by the utilization of the panel structure of data in estimation; and (2) by considering a hospital-specific intercept in the cost frontier? Three models are estimated: a stochastic cost frontier model with a hospital-specific intercept treated as a random variable for panel data; a stochastic cost frontier model without a hospital-specific intercept for panel data; and the conventional stochastic frontier model that treats the data as if they were cross-sectional. The main findings are: (1) the introduction of panel structure into the frontier estimation changes the cost inefficiency estimate significantly compared with the estimate based on cross-sectionally treated data; (2) the intercept of the cost frontier is significantly different among hospitals.

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  • Atsushi Fuj & Makoto Ohta, 1999. "Stochastic cost frontier and cost inefficiency of Japanese hospitals: a panel data analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 527-532.
    • Handle: RePEc:taf:apeclt:v:6:y:1999:i:8:p:527-532
    DOI: 10.1080/135048599352871
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    Cited by:

    1. Galina Besstremyannaya, 2011. "Managerial performance and cost efficiency of Japanese local public hospitals: A latent class stochastic frontier model," Health Economics, John Wiley & Sons, Ltd., vol. 20(S1), pages 19-34, September.
    2. Nurhafiza Md Hamzah & Kok Fong See, 2019. "Technical efficiency and its influencing factors in Malaysian hospital pharmacy services," Health Care Management Science, Springer, vol. 22(3), pages 462-474, September.
    3. Mike Smet, 2007. "Measuring performance in the presence of stochastic demand for hospital services: an analysis of Belgian general care hospitals," Journal of Productivity Analysis, Springer, vol. 27(1), pages 13-29, February.
    4. Galina Besstremyannaya, 2014. "The efficiency of labor matching and remuneration reforms: a panel data quantile regression approach with endogenous treatment variables," Working Papers w0206, New Economic School (NES).
    5. Galina Besstremyannaya, 2014. "The efficiency of labor matching and remuneration reforms: a panel data quantile regression approach with endogenous treatment variables," Working Papers w0206, Center for Economic and Financial Research (CEFIR).
    6. Galina Besstremyannaya, 2015. "Heterogeneous effect of residency matching and prospective payment on labor returns and hospital scale economies," Discussion Papers 15-001, Stanford Institute for Economic Policy Research.

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