Productivity Variation and Input Misallocation: Evidence from Hospitals

Amitabh Chandra, Carrie Colla and Jonathan Skinner

No 31569, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There are widespread differences in total factor productivity across producers in the U.S. and around the world. To explain these variations, we use simple economic insights to test the extent to which U.S. hospitals misallocate inputs by examining if the marginal return to specific inputs, conditional on total cost, differs from zero. This test does not require knowledge of the production function or specific input prices. We find large and systematic deviations from efficiency: Holding spending fixed, misallocation is estimated to account for as much as 3.3 percentage points (11% of mortality) across hospitals, and explains roughly 25% of hospital productivity variation. These results suggest large gains from improving how—not how much—hospitals spend.

JEL-codes: E23 I1 I10 (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-eff, nep-hea and nep-mac
Note: AG EH
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Citations: View citations in EconPapers (1)

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