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Nonparametric analysis of returns to scale in the US hospital industry

Author

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  • Paul W. Wilson

    (Department of Economics, University of Texas, Austin, USA)

  • Kathleen Carey

    (Management Science Group, US Department of Veterans Affairs, Bedford, USA, and School of Public Health, Boston University, USA)

Abstract

This paper presents new estimates of scale economies for US hospitals. We show that the common translog specification of hospital costs is a misspecification, and employ nonparametric, local linear estimation with both continuous and discrete covariates. A bootstrap method is used to provide inferences regarding ray scale economies and expansion path scale economies for a large sample of hospitals covering 1984-1996. We find evidence of changes in the structure of hospital costs over the sample period, as well as evidence of locally optimal hospital sizes. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Paul W. Wilson & Kathleen Carey, 2004. "Nonparametric analysis of returns to scale in the US hospital industry," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 505-524.
    • Handle: RePEc:jae:japmet:v:19:y:2004:i:4:p:505-524
    DOI: 10.1002/jae.801
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    References listed on IDEAS

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    Cited by:

    1. Jean-Philippe Boussemart & Herv頌eleu & Vivian Valdmanis, 2015. "A two-stage translog marginal cost pricing approach for Floridian hospital outputs," Applied Economics, Taylor & Francis Journals, vol. 47(38), pages 4116-4127, August.
    2. Michael Christl & Monika Köppl–Turyna, 2018. "Tax competition and the political economy of public employment: a model for Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(3), pages 607-638, August.
    3. Gilbert, R. Alton & Wheelock, David C. & Wilson, Paul W., 2004. "New evidence on the Fed's productivity in providing payments services," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2175-2190, September.
    4. Teresa D. Harrison, 2007. "Consolidations and closures: an empirical analysis of exits from the hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 16(5), pages 457-474, May.
    5. Leleu, Hervé & Moises, James & Valdmanis, Vivian, 2012. "Optimal productive size of hospital's intensive care units," International Journal of Production Economics, Elsevier, vol. 136(2), pages 297-305.
    6. Monica Giancotti & Annamaria Guglielmo & Marianna Mauro, 2017. "Efficiency and optimal size of hospitals: Results of a systematic search," PLOS ONE, Public Library of Science, vol. 12(3), pages 1-40, March.
    7. Theodore Stefos & James Burgess & Jeffrey Cohen & Laura Lehner & Eileen Moran, 2012. "Dynamics of the mental health workforce: investigating the composition of physicians and other health providers," Health Care Management Science, Springer, vol. 15(4), pages 373-384, December.
    8. Teresa Harrison, 2006. "Hospital mergers: who merges with whom?," Applied Economics, Taylor & Francis Journals, vol. 38(6), pages 637-647.
    9. Satya P. Das & Anuradha Saha, 2015. "Growth of business services: A supply‐side hypothesis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(1), pages 83-109, February.
    10. Buzzacchi, Luigi & Scellato, Giuseppe & Ughetto, Elisa, 2016. "Frequency of medical malpractice claims: The effects of volumes and specialties," Social Science & Medicine, Elsevier, vol. 170(C), pages 152-160.
    11. James F. Burgess, 2012. "Productivity Analysis in Health Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 34, Edward Elgar Publishing.
    12. Jean-Philippe Boussemart & Hervé Leleu & Viviane Valdmanis, 2013. "Price of Medicaid and Uncompensated Care compared to Medicare and Private care: A translog shadow pricing approach for Floridian hospital outputs," Working Papers 2013-ECO-02, IESEG School of Management.
    13. David C. Wheelock & Paul W. Wilson, 2012. "Do Large Banks Have Lower Costs? New Estimates of Returns to Scale for U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(1), pages 171-199, February.
    14. Massimo Filippini & Nevenka Hrovatin & Jelena Zorić, 2008. "Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods," Journal of Productivity Analysis, Springer, vol. 29(2), pages 169-182, April.
    15. Kathleen Carey & Jean M. Mitchell, 2018. "Specialization and production cost efficiency: evidence from ambulatory surgery centers," International Journal of Health Economics and Management, Springer, vol. 18(1), pages 83-98, March.
    16. Cohen, Jeffrey P. & Osleeb, Jeffrey P. & Yang, Ke, 2014. "Semi-parametric regression models and economies of scale in the presence of an endogenous variable," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 252-261.

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