Non-parametric Frontier Estimation of Health Care Efficiency Among OECD Countries, 1993-2006

Authors:

Richard Gearhart

PI/Advisor:

Paul W. Wilson

Program:

Economics (College of Business and Behavioral Science)

Abstract:

This paper examines cross-country health care efficiency rankings using modern non-parametric estimators. It re-examines the original analysis on cross country health care efficiency, extending the dataset to include 10 new years and using non-parametric estimators to estimate efficiency rankings and Malmquist indices to determine productivity change over the panel. This paper finds that cross-country heterogeneity leads to different efficiency rankings across OECD countries when using different non-parametric estimators from those used in earlier studies. Similarly, efficiency rankings are highly dependent on the choice of input and output bundles, which may be heterogeneous across countries. This paper finds that cross-country comparisons of health care efficiency are biased by choice of estimator and input-output bundle and may lead to faulty policy conclusions. It also finds that there has been productivity regression in all countries except for the United States, whose productivity improvement is not statistically different from no productivity change. Some of the factors leading to productivity regression may be due to age demographics, lack of a recent exogenous technological shock in the health care field, the costs of reactive (instead of preventive) medicine, and increased spending on end-of-life care.

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