Title: Allocative Inefficiency and its Cost: The Case of the Spanish Public Hospitals
Abstract: In this paper we present a new empirical model based on an input distance function from which allocative inefficiency can be obtained avoiding the Greene Problem. Well known in the literature, this problem refers to the difficulty in practice of separating economic efficiency in its two components, technical and allocative inefficiency, using a cost system. Moreover, we develop a procedure to calculate the cost of allocative inefficiency. Using a panel of the Spanish public hospital sector to apply our methodology, we find evidence of systematic allocative inefficiency in the employment of all variable inputs. Moreover, since inputs are generally poor substitutes, the cost of this allocative inefficiency is high.
Publication Year: 2003
Publication Date: 2003-01-01
Language: en
Type: preprint
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Cited By Count: 1
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