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Excess capacity and expense preference behaviour in National Health Systems: an application to the Spanish public hospitals

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  • Ana Rodríguez-Álvarez

    (Universidad de Oviedo, Spain)

  • C. A. Knox Lovell

    (University of Georgia, USA)

Abstract

The aim of this paper is to study excess capacity in National Health System (NHS) hospitals, which have the characteristics of a bureaucracy, within a theoretically consistent framework. In this sense, we develop and estimate an empirical model which has not previously been applied to this problem. This model, based on an input distance function, is attractive for at least two reasons. Unlike the production function, the input distance function is valid for multiproduct technologies such as that of hospitals, and in contrast to the cost function it permits testing of the cost minimisation hypothesis and therefore allows expense preference behaviour in the context of NHS hospitals. We present an application to the Spanish public hospital sector and observe persistent allocative inefficiency in variable inputs and overcapitalisation in these hospitals. Hence, our results suggest that this sector is not in long-run equilibrium and that adjustments in variable inputs and capital equipment investments are necessary to control hospital cost. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Ana Rodríguez-Álvarez & C. A. Knox Lovell, 2004. "Excess capacity and expense preference behaviour in National Health Systems: an application to the Spanish public hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 157-169.
  • Handle: RePEc:wly:hlthec:v:13:y:2004:i:2:p:157-169
    DOI: 10.1002/hec.803
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    References listed on IDEAS

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    Cited by:

    1. Rodríguez-Álvarez, Ana & Rosete-Rivero, Mayte, 2017. "Spanish public hospital waiting lists: A theoretical and empirical approach," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 11, pages 1-21.
    2. Briec, Walter & Kerstens, Kristiaan & Prior, Diego & Van de Woestyne, Ignace, 2010. "Tangency capacity notions based upon the profit and cost functions: A non-parametric approach and a general comparison," Economic Modelling, Elsevier, vol. 27(5), pages 1156-1166, September.
    3. Rodriguez-Alvarez, Ana & Tovar, Beatriz & Trujillo, Lourdes, 2007. "Firm and time varying technical and allocative efficiency: An application to port cargo handling firms," International Journal of Production Economics, Elsevier, vol. 109(1-2), pages 149-161, September.
    4. Ancarani, Alessandro & Di Mauro, Carmela & Gitto, Simone & Mancuso, Paolo & Ayach, Ali, 2016. "Technology acquisition and efficiency in Dubai hospitals," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 475-485.
    5. Rodríguez-Álvarez, Ana & Tovar de la Fe, Beatriz & Trujillo, Lourdes, 2004. "Technical and Allocative Efficiency in Spanish Port Cargo Handling Firms," Efficiency Series Papers 2004/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    6. Fabrizio Erbetta & Carmelo Petraglia, 2011. "Drivers of Regional Efficiency Differentials in Italy: Technical Inefficiency or Allocative Distortions?," Growth and Change, Wiley Blackwell, vol. 42(3), pages 351-375, September.
    7. Tim Coelli & Gholamreza Hajargasht & C.A. Knox Lovell, 2008. "Econometric Estimation of an Input Distance Function in a System of Equations," CEPA Working Papers Series WP012008, School of Economics, University of Queensland, Australia.
    8. Blank, Jos L. T. & Vogelaar, Iris, 2004. "Specifying technical change: a research on the nature of technical change in Dutch hospital industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 448-463, July.
    9. Ana Rodríguez Álvarez & Víctor Fernández Blanco & José Baños Pino, 2005. "El efecto de la regulación sobre la eficiencia productiva: una aplicación a las compañías ferroviarias europeas," Investigaciones Economicas, Fundación SEPI, vol. 29(2), pages 351-378, May.
    10. Lota, Tamini D. & Bruno, Larue & West, Gale E., 2011. "Technical Efficiency, Environment Efficiency, Productivity and Beneficial Management Practices," Working Papers 102067, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    11. Barros, Carlos Pestana & Menezes, Antonio & Vieira, José António Cabral & Peypoch, Nicolas & Solonandrasana, Bernardin, 2007. "An Analysis of Hospital Efficiency and Productivity Growth Using the Luenberger Productivity Indicator," IZA Discussion Papers 2689, Institute for the Study of Labor (IZA).
    12. Walter Briec & Kristiaan Kerstens & Diego Prior, 2009. "Tangency Capacity Notions Based upon the Pro?t and Cost Functions: A Non-Parametric Approach and a Comparison," Working Papers 2009-ECO-05, IESEG School of Management.
    13. Jos L. T. Blank & Bart L. Van Hulst, 2009. "Productive innovations in hospitals: an empirical research on the relation between technology and productivity in the Dutch hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 18(6), pages 665-679.
    14. C. A. Knox Lovell & Ana Rodríguez-Álvarez & Alan Wall, 2009. "The effects of stochastic demand and expense preference behaviour on public hospital costs and excess capacity," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 227-235.

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