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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 222:
Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis

Ulf-G. Gerdtham (), Mickael Löthgren (), Magnus Tambour () and Clas Rehnberg ()

Abstract: This paper has two purposes. The first purpose is methodological and aims to extend previous work on efficiency analysis by implementing a multiple-output stochastic ray frontier production function model. This model generalizes the single-output stochastic frontier model to multiple-input, multiple-output technologies and allows simultaneous estimation of technical efficiency and analysis of influential variables on efficiency. The second, empirical purpose, is to test for existence and magnitude of the effect of purchaser/provider split combined with new reimbursement schemes on technical efficiency in the Swedish public hospital system. The analysis is carried out with a panel data set covering the total population of 26 Swedish County Councils from 1989 to 1995. Our empirical results support the frontier model specification and indicate that output-based reimbursement improves technical efficiency. The potential saving in costs due to a switch from budget-based allocation to output-based allocation is estimated to be almost 10%.

Keywords: Internal markets; stochastic ray frontier model; technical efficiency; panel data.; (follow links to similar papers)

JEL-Codes: C12; C13; C23; D24; I10; (follow links to similar papers)

22 pages, February 26, 1998

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This paper is published as:
Gerdtham, Ulf-G., Mickael Löthgren, Magnus Tambour and Clas Rehnberg, (1999), 'Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis', Health Economics, Vol. 8, pages 151-164



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