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Benchmarking For Productivity Improvement: A Health-Care Application


  • Daniel A. Ackerberg
  • Matilde P. Machado
  • Michael H. Riordan


A methodology is developed and applied to compare the performance of publicly funded agencies providing treatment for alcohol abuse in Maine. The methodology estimates a Wiener process that determines the duration of completed treatments, while allowing for agency differences in the effectiveness of treatment, costs of treatment, standards for completion of treatment, patient attrition, and the characteristics of patient populations. Notably, the Wiener process model separately identifies agency fixed effects that describe differences in the effectiveness of treatment ("treatment effects"), and effects that describe differences in the unobservable characteristics of patients ("population effects"). The estimated model enables hypothetical comparisons of how different agencies would treat the same populations. The policy experiment of transferring the treatment practices of more cost-effective agencies suggests that Maine could have significantly reduced treatment costs without compromising health outcomes by identifying and transferring best practices. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Daniel A. Ackerberg & Matilde P. Machado & Michael H. Riordan, 2006. "Benchmarking For Productivity Improvement: A Health-Care Application ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 161-201, February.
  • Handle: RePEc:ier:iecrev:v:47:y:2006:i:1:p:161-201

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    References listed on IDEAS

    1. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, May.
    2. Fernando Alvarez & Andrew Atkeson & Patrick J. Kehoe, 2002. "Money, Interest Rates, and Exchange Rates with Endogenously Segmented Markets," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 73-112, February.
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    6. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
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    10. Fernando Alvarez & Andrew Atkeson & Chris Edmond, 2003. "On the Sluggish Response of Prices to Money in an Inventory-Theoretic Model of Money Demand," NBER Working Papers 10016, National Bureau of Economic Research, Inc.
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    Cited by:

    1. John A. Romley & Dana P. Goldman, 2011. "How Costly is Hospital Quality? A Revealed‐Preference Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 578-608, December.
    2. Romero-Medina, Antonio & Machado, Matilde P. & Mora, Ricardo, 2006. "A methodology to measure hospital quality using physicians' choices over training vacancies," UC3M Working papers. Economics we060201, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Matilde P. Machado & Ricardo Mora & Antonio Romero-Medina, 2012. "Can We Infer Hospital Quality From Medical Graduates’ Residency Choices?," Journal of the European Economic Association, European Economic Association, vol. 10(6), pages 1400-1424, December.
    4. Paul Fenn & David Paton & Leighton Vaughan Williams, 2009. "Productivity growth and funding of public service broadcasting," Public Choice, Springer, vol. 141(3), pages 335-349, December.

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