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Nonparametric analysis of returns to scale in the US hospital industry
Author(s) -
Wilson Paul W.,
Carey Kathleen
Publication year - 2004
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.801
Subject(s) - nonparametric statistics , econometrics , economies of scale , covariate , scale (ratio) , sample (material) , returns to scale , economics , estimation , statistics , mathematics , geography , production (economics) , macroeconomics , microeconomics , chemistry , cartography , management , chromatography
This paper presents new estimates of scale economies for US hospitals. We show that the common translog specification of hospital costs is a misspecification, and employ nonparametric, local linear estimation with both continuous and discrete covariates. A bootstrap method is used to provide inferences regarding ray scale economies and expansion path scale economies for a large sample of hospitals covering 1984–1996. We find evidence of changes in the structure of hospital costs over the sample period, as well as evidence of locally optimal hospital sizes. Copyright © 2004 John Wiley & Sons, Ltd.