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  3. American Economic Review
  4. May 2016
  5. Sources of Inefficiency in Healthcare and Education

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Sources of Inefficiency in Healthcare and Education

  • Amitabh Chandra
  • Douglas Staiger
American Economic Review
vol. 106, no. 5, May 2016
(pp. 383–87)
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Abstract

Healthcare and education exhibit wide variation in spending that is loosely associated with outcomes. We study supply-side explanations for such variation in in healthcare, and extend this discussion to how it might apply to education. In both sectors, variation in risk-adjusted rates could arise from some providers or educators doing too much (overuse) or others are using too little (underuse). Alternatively, the production function varies across providers and educators, so that hospitals and educators with higher returns to treatment deliver more because of comparative advantage. We discuss how a prototypical Roy model can separate these explanations.

Citation

Chandra, Amitabh, and Douglas Staiger. 2016. "Sources of Inefficiency in Healthcare and Education." American Economic Review, 106 (5): 383–87. DOI: 10.1257/aer.p20161079

Additional Materials

JEL Classification

  • D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • I10 Health: General
  • I20 Education and Research Institutions: General