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Measurement of Output and Quality Adjustment When Hedonics Cannot Be Used: An Illustration for the Day Care Industry

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  • Swati Mukerjee
  • Ann Dryden Witte
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    Abstract

    In this paper, we develop time series estimates of the output and quality of output for day care centers in the U.S. for the 1970s and 1980s. As far as we are aware this is the first time that a time series for day care output and quality has been published. Our results using both physical and dollar measures of output show very rapid growth in output, particularly during the 1980s. We find that both the real price of care in centers and the staff/child ratio in day care centers declined between 1974 and 1988. These declines may reflect either improved productivity or a decline in the quality of care provided by day care centers. Clearly, these declines merit further investigation. We illustrate a method that may be used to adjust physical measures of output for changes in quality when, as is true in the case of day care, no single market clearing price is available. The method involves the estimation of cost functions and the calculation of marginal costs for producing quality.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3771.

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    Date of creation: Jul 1991
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    Publication status: published as Output Measurement in the Service Sector, ed. Zvi Griliches. Chicago: University of Chicago Press, 1992, pp. 343-369
    Handle: RePEc:nbr:nberwo:3771

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    1. Swati Mukerjee & Ann Dryden Witte & Sheila Hollowell, 1990. "Provision of Child Care: Cost Functions for Profit-Making and Not-for-Profit Day Care Centers," NBER Working Papers 3345, National Bureau of Economic Research, Inc.
    2. Allan D. Searle & Charles Waite, 1980. "Current Efforts to Measure Productivity in the Public Sector: How Adequate for the National Accounts?," NBER Chapters, National Bureau of Economic Research, Inc, in: New Developments in Productivity Measurement, pages 333-356 National Bureau of Economic Research, Inc.
    3. Pauly, Mark V & Redisch, Michael, 1973. "The Not-For-Profit Hospital as a Physicians' Cooperative," American Economic Review, American Economic Association, American Economic Association, vol. 63(1), pages 87-99, March.
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