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Sources of Inefficiency in Healthcare and Education

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  • Amitabh Chandra
  • Douglas Staiger

Abstract

Healthcare and education exhibit wide variation in spending that is loosely associated with outcomes. We study supply-side explanations for such variation in in healthcare, and extend this discussion to how it might apply to education. In both sectors, variation in risk-adjusted rates could arise from some providers or educators doing too much (overuse) or others are using too little (underuse). Alternatively, the production function varies across providers and educators, so that hospitals and educators with higher returns to treatment deliver more because of comparative advantage. We discuss how a prototypical Roy model can separate these explanations.

Suggested Citation

  • Amitabh Chandra & Douglas Staiger, 2016. "Sources of Inefficiency in Healthcare and Education," American Economic Review, American Economic Association, vol. 106(5), pages 383-387, May.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:383-87
    Note: DOI: 10.1257/aer.p20161079
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    References listed on IDEAS

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    1. Raj Chetty & John N. Friedman & Jonah E. Rockoff, 2014. "Measuring the Impacts of Teachers I: Evaluating Bias in Teacher Value-Added Estimates," American Economic Review, American Economic Association, vol. 104(9), pages 2593-2632, September.
    2. Joseph J. Doyle Jr. & John A. Graves & Jonathan Gruber & Samuel A. Kleiner, 2015. "Measuring Returns to Hospital Care: Evidence from Ambulance Referral Patterns," Journal of Political Economy, University of Chicago Press, vol. 123(1), pages 170-214.
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    Cited by:

    1. Böckerman, Petri & Kortelainen, Mika & Laine, Liisa T. & Nurminen, Mikko & Saxell, Tanja, 2019. "Digital Waste? Unintended Consequences of Health Information Technology," Working Papers 117, VATT Institute for Economic Research.
    2. Szklo, Michel & Clarke, Damian & Rocha, Rudi, 2024. "Does Increasing Public Spending in Health Improve Health? Lessons from a Constitutional Reform in Brazil," IZA Discussion Papers 16829, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General

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