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Decomposition of total factor productivity in world health production: a stochastic frontier approach

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  • Shao-Hsun Keng
  • Yang Li

Abstract

While countries around the globe have increased spending on health care, economists and policy makers have raised concerns over the productivity and efficiency of health care. This article applies a stochastic frontier approach to address this issue using data from 141 countries for the period 1993 to 1997. From the perspective of productivity change, our results suggest that gains in population health will be greater provided that more resources are allocated to investment in human capital. We also show that the scale component accounts for 65-70% of the productivity change. That is, omitting the scale component in our case will result in a significant underestimation of the decline in the productivity of world health production. We do not find evidence supporting the hypothesis that production frontiers differ between Organization for Economic Cooperation and Development (OECD) and non-OECD countries. However, the change in productivity and scale elasticity do vary significantly between these countries.

Suggested Citation

  • Shao-Hsun Keng & Yang Li, 2010. "Decomposition of total factor productivity in world health production: a stochastic frontier approach," Applied Economics, Taylor & Francis Journals, vol. 42(23), pages 3011-3021.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:23:p:3011-3021
    DOI: 10.1080/00036840801964815
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    1. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1.
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    Cited by:

    1. Alwin D’Souza & Amit Shovon Ray, 2017. "Structural Transformation in the North-eastern Region of India: Charting Out an Agriculture-based Development Policy," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 6(3), pages 373-394, December.
    2. Yi-Chung Hsu, 2014. "Efficiency in government health spending: a super slacks-based model," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 111-126, January.
    3. Constantin Ogloblin, 2023. "Health care financing and productivity of health care in OECD countries: a stochastic frontier analysis," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 259-283, June.

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