IDEAS home Printed from https://ideas.repec.org/p/qld/uqcepa/63.html
   My bibliography  Save this paper

An Econometric Approach To Estimating Support Prices And Measures Of Productivity Change In Public Hospitals

Author

Abstract

In industry sectors where market prices are unavailable it is common to represent multiple-input multiple-output production technologies using distance functions. Econometric estimation of such functions is complicated by the fact that more than one variable in the function may be endogenous. In such cases, maximum likelihood estimation can lead to biased and inconsistent estimates of the model parameters and associated measures of firm performance. We solve the problem by using linear programming to construct a quantity index. The distance function is then written in the form of a conventional stochastic frontier model where the explanatory variables are unambiguously exogenous. We use this approach to estimate productivity indexes and support (or shadow) prices for a sample of Australian public hospitals. We decompose the productivity index into several measures of environmental change and efficiency change. We find that the productivity effects of improvements in input-oriented technical efficiency have been largely offset by the effects of deteriorations in the production environment over time.

Suggested Citation

  • C.J. O’Donnell & K. Nguyen, 2011. "An Econometric Approach To Estimating Support Prices And Measures Of Productivity Change In Public Hospitals," CEPA Working Papers Series WP032011, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqcepa:63
    as

    Download full text from publisher

    File URL: https://economics.uq.edu.au/files/5211/WP032011.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Christopher J. O'Donnell, 2010. "Measuring and decomposing agricultural productivity and profitability change ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 527-560, October.
    2. Fernandez, Carmen & Koop, Gary & Steel, Mark, 2000. "A Bayesian analysis of multiple-output production frontiers," Journal of Econometrics, Elsevier, vol. 98(1), pages 47-79, September.
    3. Frech, H E, III & Mobley, Lee Rivers, 2000. "Efficiency, Growth, and Concentration: An Empirical Analysis of Hospital Markets," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 369-384, July.
    4. Balk,Bert M., 2012. "Price and Quantity Index Numbers," Cambridge Books, Cambridge University Press, number 9781107404960, January.
    5. M. Diaz & Rosario Sanchez, 2008. "Firm size and productivity in Spain: a stochastic frontier analysis," Small Business Economics, Springer, vol. 30(3), pages 315-323, March.
    6. Biorn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2002. "The Effect of Activity-Based Financing on Hospital Efficiency: A Panel Data Analysis of DEA Efficiency Scores 1992-2000," MPRA Paper 8099, University Library of Munich, Germany.
    7. Christopher J. O’Donnell, 2016. "Nonparametric Estimates of the Components of Productivity and Profitability Change in U.S. Agriculture," International Series in Operations Research & Management Science, in: Joe Zhu (ed.), Data Envelopment Analysis, chapter 0, pages 515-541, Springer.
    8. Sherman T. Folland & Richard A. Hofler, 2001. "How reliable are hospital efficiency estimates? Exploiting the dual to homothetic production," Health Economics, John Wiley & Sons, Ltd., vol. 10(8), pages 683-698, December.
    9. Andrew Street, 2003. "How much confidence should we place in efficiency estimates?," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 895-907, November.
    10. Annika Herr, 2008. "Cost and technical efficiency of German hospitals: does ownership matter?," Health Economics, John Wiley & Sons, Ltd., vol. 17(9), pages 1057-1071, September.
    11. Linna, Miika & Hakkinen, Unto & Magnussen, Jon, 2006. "Comparing hospital cost efficiency between Norway and Finland," Health Policy, Elsevier, vol. 77(3), pages 268-278, August.
    12. L Cherchye & W Moesen & N Rogge & T Van Puyenbroeck & M Saisana & A Saltelli & R Liska & S Tarantola, 2008. "Creating composite indicators with DEA and robustness analysis: the case of the Technology Achievement Index," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(2), pages 239-251, February.
    13. Alessandra Ferrari, 2006. "The internal market and hospital efficiency: a stochastic distance function approach," Applied Economics, Taylor & Francis Journals, vol. 38(18), pages 2121-2130.
    14. Donald F. Vitaliano & Mark Toren, 1996. "Hospital Cost and Efficiency in a Regime of Stringent Regulation," Eastern Economic Journal, Eastern Economic Association, vol. 22(2), pages 161-175, Spring.
    15. Mike Smet, 2007. "Measuring performance in the presence of stochastic demand for hospital services: an analysis of Belgian general care hospitals," Journal of Productivity Analysis, Springer, vol. 27(1), pages 13-29, February.
    16. Benoit Dervaux & Gary Ferrier & Herve Leleu & Vivian Valdmanis, 2004. "Comparing French and US hospital technologies: a directional input distance function approach," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1065-1081.
    17. C.J. O'Donnell, 2008. "An aggregate quantity-price framework for measuring and Decomposing productivity and profitability change," CEPA Working Papers Series WP072008, School of Economics, University of Queensland, Australia.
    18. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    19. COELLI, Tim, 2000. "On the econometric estimation of the distance function representation of a production technology," LIDAM Discussion Papers CORE 2000042, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    20. C. O’Donnell, 2014. "Econometric estimation of distance functions and associated measures of productivity and efficiency change," Journal of Productivity Analysis, Springer, vol. 41(2), pages 187-200, April.
    21. Andrew Street & Rowena Jacobs, 2002. "Relative performance evaluation of the English acute hospital sector," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1109-1119.
    22. W. David Bradford & Andrew N. Kleit & Marie A. Krousel-Wood & Richard N. Re, 2001. "Stochastic Frontier Estimation Of Cost Models Within The Hospital," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 302-309, May.
    23. Roibas, David & Arias, Carlos, 2004. "Endogeneity Problems in the Estimation of Multi-Output Technologies," Efficiency Series Papers 2004/06, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    24. Mary E. Deily & Niccie L. McKay & Fred H. Dorner, 2000. "Exit and Inefficiency: The Effects of Ownership Type," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 734-747.
    25. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    26. D K Despotis, 2005. "A reassessment of the human development index via data envelopment analysis," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(8), pages 969-980, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Malikov, Emir, 2016. "Estimating Multi-Product Production Functions and Productivity using Control Functions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235108, Agricultural and Applied Economics Association.
    2. Shabbir Ahmad, 2020. "Estimating input-mix efficiency in a parametric framework: application to state-level agricultural data for the United States," Applied Economics, Taylor & Francis Journals, vol. 52(36), pages 3976-3997, July.
    3. 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.
    4. Zhichao Wang & Valentin Zelenyuk, 2021. "Performance Analysis of Hospitals in Australia and its Peers: A Systematic Review," CEPA Working Papers Series WP012021, School of Economics, University of Queensland, Australia.
    5. Ahmad, Shabbir & Shankar, Sriram & Steen, John & Verreynne, Martie-Louise & Burki, Abid Aman, 2021. "Using measures of efficiency for regionally-targeted smallholder policy intervention: The case of Pakistan’s horticulture sector," Land Use Policy, Elsevier, vol. 101(C).
    6. Valentin Zelenyuk & Zhichao Wang, 2023. "Random vs. Explained Inefficiency in Stochastic Frontier Analysis: The Case of Queensland Hospitals," CEPA Working Papers Series WP052023, School of Economics, University of Queensland, Australia.
    7. Mamardashvili, Phatima & Bokusheva, Raushan & Schmid, Dierk, 2014. "Heterogeneous Farm Output and Technical Efficiency Estimates," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 63(01), pages 1-15, March.
    8. Danelon, André Felipe & Spolador, Humberto Francisco Silva & Bergtold, Jason Scott, 2023. "The role of productivity and efficiency gains in the sugar-ethanol industry to reduce land expansion for sugarcane fields in Brazil," Energy Policy, Elsevier, vol. 172(C).
    9. Laurenceson, James & O'Donnell, Christopher, 2014. "New estimates and a decomposition of provincial productivity change in China," China Economic Review, Elsevier, vol. 30(C), pages 86-97.
    10. Emir Malikov & Gudbrand Lien, 2021. "Proxy Variable Estimation of Multiproduct Production Functions," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1878-1902, October.
    11. Mamardashvili, Phatima & Bokusheva, Raushan & Schmid, Dierk, 2014. "Heterogeneous Farm Output and Technical Efficiency Estimates," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(1).
    12. Maietta, Ornella Wanda & De Devitiis, Biagia & Destefanis, Sergio & Suppa, Domenico, 2019. "Human capital and rural development policy: evidence from European FADN regions," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 8(3), December.
    13. Biagia De Devitiis & Ornella Wanda Maietta, 2015. "Shadow Prices of Human Capital in Agriculture. Evidence from European FADN Regions," CSEF Working Papers 415, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    14. Bao Hoang Nguyen & Zhichao Wang & Valentin Zelenyuk, 2023. "Efficiency of Queensland Public Hospitals via Spatial Panel Stochastic Frontier Models," CEPA Working Papers Series WP102023, School of Economics, University of Queensland, Australia.
    15. O’Donnell, C.J., 2016. "Using information about technologies, markets and firm behaviour to decompose a proper productivity index," Journal of Econometrics, Elsevier, vol. 190(2), pages 328-340.
    16. O'Donnell, C.J., 2014. "Technologies, Markets and Behaviour: Some Implications for Estimating Efficiency and Productivity Change," 2014 Conference (58th), February 4-7, 2014, Port Macquarie, Australia 165867, Australian Agricultural and Resource Economics Society.
    17. C. J. O’Donnell & Saeideh Fallah-Fini & Konstantinos Triantis, 2017. "Measuring and analysing productivity change in a metafrontier framework," Journal of Productivity Analysis, Springer, vol. 47(2), pages 117-128, April.
    18. Gavilan, José M. & Ortega, Francisco J., 2020. "Productive efficiency analysis of quantitative economics journals through Stochastic Frontier Analysis using panel data || Análisis de eficiencia productiva de revistas de economía cuantitativa a trav," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 30(1), pages 297-311, December.
    19. C.J. O'Donnell, 2011. "The Sources of Productivity Change in the Manufacturing Sectors of the U.S. Economy," CEPA Working Papers Series WP072011, School of Economics, University of Queensland, Australia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Varabyova, Yauheniya & Schreyögg, Jonas, 2013. "International comparisons of the technical efficiency of the hospital sector: Panel data analysis of OECD countries using parametric and non-parametric approaches," Health Policy, Elsevier, vol. 112(1), pages 70-79.
    2. Roberto Colombi & Gianmaria Martini & Giorgio Vittadini, 2017. "Determinants of transient and persistent hospital efficiency: The case of Italy," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 5-22, September.
    3. C.J. O'Donnell, 2011. "The Sources of Productivity Change in the Manufacturing Sectors of the U.S. Economy," CEPA Working Papers Series WP072011, School of Economics, University of Queensland, Australia.
    4. C. O’Donnell, 2014. "Econometric estimation of distance functions and associated measures of productivity and efficiency change," Journal of Productivity Analysis, Springer, vol. 41(2), pages 187-200, April.
    5. Mehdi Farsi, 2008. "The temporal variation of cost-efficiency in Switzerland’s hospitals: an application of mixed models," Journal of Productivity Analysis, Springer, vol. 30(2), pages 155-168, October.
    6. Kim-Huong Nguyen & Tim Coelli, 2009. "Quantifying the effects of modelling choices on hospital efficiency measures: A meta-regression analysis," CEPA Working Papers Series WP072009, School of Economics, University of Queensland, Australia.
    7. Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 335-350, March.
    8. Stefan Meyer, 2015. "Payment schemes and cost efficiency: evidence from Swiss public hospitals," International Journal of Health Economics and Management, Springer, vol. 15(1), pages 73-97, March.
    9. Jana Votápková & Lenka Šťastná, 2013. "Efficiency of Hospitals in the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(4), pages 524-541.
    10. Laurenceson, James & O'Donnell, Christopher, 2014. "New estimates and a decomposition of provincial productivity change in China," China Economic Review, Elsevier, vol. 30(C), pages 86-97.
    11. William Griffiths & Xiaohui Zhang & Xueyan Zhao, 2010. "A Stochastic Frontier Model for Discrete Ordinal Outcomes: A Health Production Function," Department of Economics - Working Papers Series 1092, The University of Melbourne.
    12. Hugo Fuentes & Emili Grifell-Tatjé & Sergio Perelman, 2005. "Product Specialization, Efficiency and Productivity Change in the Spanish Insurance Industry," CREPP Working Papers 0506, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    13. Lukas Kwietniewski & Jonas Schreyögg, 2018. "Efficiency of physician specialist groups," Health Care Management Science, Springer, vol. 21(3), pages 409-425, September.
    14. Atilano Pena-López & Paolo Rungo & Beatriz López-Bermúdez, 2021. "The "Efficiency" Effect of Conceptual Referents on the Generation of Happiness: A Cross-National Analysis," Journal of Happiness Studies, Springer, vol. 22(6), pages 2457-2483, August.
    15. Hanousek, Jan & Kočenda, Evžen & Shamshur, Anastasiya, 2015. "Corporate efficiency in Europe," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 24-40.
    16. Lukas Kwietniewski & Jonas Schreyögg, 2018. "Profit efficiency of physician practices: a stochastic frontier approach using panel data," Health Care Management Science, Springer, vol. 21(1), pages 76-86, March.
    17. Andrew Street, 2003. "How much confidence should we place in efficiency estimates?," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 895-907, November.
    18. Per J. Agrell & Mehdi Farsi & Massimo Filippini & Martin Koller, 2013. "Unobserved heterogeneous effects in the cost efficiency analysis of electricity distribution systems," Working Papers 0038, Swiss Economics.
    19. Sari, Nazmi, 2003. "Efficiency outcomes of market concentration and managed care," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1571-1589, December.
    20. Sebastian Linde, 2023. "Hospital cost efficiency: an examination of US acute care inpatient hospitals," International Journal of Health Economics and Management, Springer, vol. 23(3), pages 325-344, September.

    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qld:uqcepa:63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SOE IT (email available below). General contact details of provider: https://edirc.repec.org/data/decuqau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.