Relative Efficiency, Scale Effect, and Scope Effect of Public Hospitals: Evidence from Australia

27 Pages Posted: 12 Jan 2007  

Jian Wang

Shandong University

Zhong Zhao

Institute for the Study of Labor (IZA); Renmin University of China

Amir Mahmood

University of Newcastle (Australia)

Date Written: December 2006

Abstract

Using the 1997-1998 New South Wales public-hospitals comparison data, we investigate the hospital-level inefficiency by applying a stochastic-frontier multiproduct cost function. We use a flexible translog cost function to reduce the measurement errors of the outputs of the hospital. The main findings are: First, inefficiency accounts for 9.3% of total hospital costs in large hospitals and 11.3% in small hospitals, when including complexity indicators. Second, diseconomies of scale exist in very large hospitals, whereas scale economies appear in very small hospitals. Third, scope effects are found in both large and small hospitals. Fourth, small hospitals are more labor-intensive than large hospitals are.

Keywords: translog cost function, economies of scale and scope, efficiency, public hospital

JEL Classification: I11, I18, C31

Suggested Citation

Wang, Jian and Zhao, Zhong and Mahmood, Amir, Relative Efficiency, Scale Effect, and Scope Effect of Public Hospitals: Evidence from Australia (December 2006). IZA Discussion Paper No. 2520. Available at SSRN: https://ssrn.com/abstract=956386

Jian Wang

Shandong University ( email )

27 Shanda Nanlu
South Rd.
Jinan, Shandong 250100
China

HOME PAGE: http://www.chmp.sdu.edu.cn/Eng/content/WangJian.htm

Zhong Zhao (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Amir Mahmood

University of Newcastle (Australia) ( email )

University Drive
Callaghan, NSW 2308
Australia

HOME PAGE: http://buslaw1.newcastle.edu.au/policy/staffdetail.cfm?staff_id=49

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