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Cost Efficiency and Scale Economies in General Dental Practices in the U.S.: A Non-parametric and Parametric Analysis

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Author Info

  • Lei Chen

    (University of Connecticut)

  • Subhash C. Ray

    (University of Connecticut)

Abstract

This paper uses both the non-parametric method of Data Envelopment Analysis (DEA) and the econometric method of Stochastic Frontier Analysis (SFA) to study the production technology and cost efficiency of the U.S. dental care industry using practice level data. The American Dental Association (ADA) 2006 survey data for a number of general dental practices in Colorado are used for the empirical analyses. The result shows that the average cost efficiency score is 0.79 for DEA and 0.87 for SFA, and the cost inefficiency comes mainly from the allocative inefficiency. The minimum average cost of production is 50.6 cents for each dollar of gross billing generated. The optimal output level for a dental practice to fully exploit the economies of scale is at $1.68 million. Both DEA and SFA provide generally consistent results.

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File URL: http://web2.uconn.edu/economics/working/2010-11.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2010-11.

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Length: 21 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:uct:uconnp:2010-11

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Related research

Keywords: Dental Care; Cost Efficiency; Economies of Scale; Data Envelopment Analysis; Stochastic Frontier Analysis;

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