Analysis of Hospital Production: An Output Index Approach
Article first published online: 19 DEC 2013
Copyright © 2014 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 30, Issue 3, pages 398–421, April/May 2015
How to Cite
2015), Analysis of Hospital Production: An Output Index Approach. J. Appl. Econ., 30: 398–421. doi: 10.1002/jae.2371., , and (
- Issue published online: 13 APR 2015
- Article first published online: 19 DEC 2013
- Manuscript Revised: 23 JUL 2013
- Manuscript Received: 23 APR 2012
In this study, we develop and implement an output index approach to the estimation of hospital cost functions that reflects the differentiated nature of hospital care. The approach combines the estimation of an output index within a flexible functional form. We find, in an application to California hospitals, evidence of scope economies across specialties within primary care, and diseconomies of scope within secondary and tertiary care. Minimum efficient scale is reached at larger levels of output than would be estimated by conventional techniques. These results indicate the importance of accounting for firm output heterogeneity when estimating cost functions. Copyright © 2014 John Wiley & Sons, Ltd.