Determinants of soft budget constraints: how public debt affects hospital performance in Austria

Michael Berger, Margit Sommersguter-Reichmann and Thomas Czypionka

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Soft budget constraints (SBCs) undermine reforms to increase hospital service efficiency when hospital management can count on being bailed out by (subnational) governments in case of deficits. Using cost accounting data on publicly financed, non-profit hospitals in Austria from 2002 to 2015, we analyse the association between SBCs and hospital efficiency change in a setting with negligible risk of hospital closure in a two-stage study design based on bias-corrected non-radial input-oriented data envelopment analysis and ordinary least squares regression. We find that the European debt crisis altered the pattern of hospital efficiency development: after the economic crisis, hospitals in low-debt states had a 1.1 percentage point lower annual efficiency change compared to hospitals in high-debt states. No such systematic difference is found before the economic crisis. The results suggest that sudden exogenous shocks to public finances can increase the budgetary pressure on publicly financed institutions, thereby counteracting a pre-existing SBC.

Keywords: bootstrapping; data envelopment analysis; hospital budgets; hospital efficiency; public debt; soft budget constraints (search for similar items in EconPapers)
JEL-codes: H60 H63 (search for similar items in EconPapers)
Date: 2020-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Social Science and Medicine, 1, March, 2020, 249. ISSN: 0277-9536

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