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Hospital cost functions for developing countries


  • Wagstaff, Adam
  • Barnum, Howard


There is extensive literature on hospital cost functions for industrial countries, but very little literature for developing countries. Yet the issues facing policy-makers in all countries are much the same: are hospitals overcapitalized, as is often claimed of U.S. hospitals? Are hospitals inefficient in other respects? Do hospitals vary in efficiency? Are private hospitals more efficient than their public counterparts? Should hospitals specialize or provide a broad range of services? Should costs be reduced by concentrating cases in fewer hospitals? The authors critically survey the techniques available for analyzing hospital costs and review the few hospital cost-function studies undertaken for developing countries. Although the paper is intended primarily for those working in developing countries, the discussion for cost function methodology has broad implications for interpreting econometric cost functions and for examining economies of scale and scope in both developing and industrial countries. The authors survey of econometric techniques is not uncritical. They question, for example, the validity of recent tests of over-capitalization undertaken on American hospitals. They also make general observations about the methods used to investigate economies of scope and economies of scale.

Suggested Citation

  • Wagstaff, Adam & Barnum, Howard, 1992. "Hospital cost functions for developing countries," Policy Research Working Paper Series 1044, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1044

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    References listed on IDEAS

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    8. Michael Barrow & Adam Wagstaff, 1989. "Efficiency measurement in the public sector: an appraisal," Fiscal Studies, Institute for Fiscal Studies, vol. 10(1), pages 72-97, February.
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    Cited by:

    1. Wang, Jian & Zhao, Zhong & Mahmood, Amir, 2006. "Relative Efficiency, Scale Effect, and Scope Effect of Public Hospitals: Evidence from Australia," IZA Discussion Papers 2520, Institute for the Study of Labor (IZA).
    2. World Bank, 2009. "Serbia - Baseline Survey on Cost and Efficiency in Primary Health Care Centers Before Provider Payment Reforms," World Bank Other Operational Studies 3036, The World Bank.


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