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A comparison of hospital scale effects in short‐run and long‐run cost functions
Author(s) -
Aletras Vassilis H.
Publication year - 1999
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/(sici)1099-1050(199909)8:6<521::aid-hec462>3.0.co;2-g
Subject(s) - scale (ratio) , short run , economics , econometrics , statistics , mathematics , geography , monetary economics , cartography
Numerous estimates of economies of scale in the hospital setting have been obtained since the early 1980s from both flexible long‐run and short‐run cost functions. Although the theoretical superiority of the latter approach is widely recognized, it has been previously suggested that the two cost specifications yield quite similar econometric findings regarding scale effects. This paper utilizes a new data set consisting of 91 Greek NHS hospitals in order to empirically examine this proposition by comparing economies of scale estimates derived from both translog total and variable cost functions. The results indicate that the use of long‐run equations might seriously mislead policy makers and that constant returns to scale prevail in Greek public hospitals. Copyright © 1999 John Wiley & Sons, Ltd.