Agglomeration and Cost Economies for Washington State Hospital Services

Posted: 8 Aug 2016

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business

Catherine J. Morrison Paul

University of California, Davis - Department of Agricultural and Resource Economics; National Bureau of Economic Research (NBER); University of Hartford - Barney School of Business

Date Written: 2008

Abstract

Hospital cost efficiency is dependent on the potential to generate cost economies, which imply lower costs for hospitals that are, for example, larger or more diversified. Although scale and scope economies have been recognized in the literature on hospital costs, agglomeration economies due to hospital clustering have received little attention. We consider the impact of such spatial linkages, which may result from labor pooling or knowledge spillovers, by including a measure of other hospitals' proximity in a flexible cost function model. We find significant agglomeration economies for the Washington State hospitals in our dataset; geographic concentration appears to reduce costs for most treatment centers. We also find significant scale economies, and some evidence of scope economies from complementarities between outputs and among treatment centers.

Keywords: hospital costs, agglomeration economies, clustering

JEL Classification: R3

Suggested Citation

Cohen, Jeffrey and Morrison Paul, Catherine J., Agglomeration and Cost Economies for Washington State Hospital Services (2008). Regional Science and Urban Economics, Vol. 38, No. 6, 2008, Available at SSRN: https://ssrn.com/abstract=2819610

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Catherine J. Morrison Paul

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
916-752-0469 (Phone)
916-752-5614 (Fax)

National Bureau of Economic Research (NBER)

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University of Hartford - Barney School of Business

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West Hartford, CT 06117
United States

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