Abstract
In this paper, we present a new empirical model based on an input distance function, from which estimates of allocative inefficiency and its cost can be obtained. The model avoids the “Greene problem,” which refers to the difficulty in practice of using a cost system to separate economic inefficiency into its technical and allocative components. We also develop a procedure to calculate the cost of allocative inefficiency. Using a panel of Spanish public hospitals to apply our methodology, we find evidence of systematic allocative inefficiency in the employment of variable inputs. Since inputs are generally poor substitutes, the cost of this allocative inefficiency is high.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
