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Abstract

This article presents a parametric approach to healthcare system productivity analysis across the USA between 2000 and 2003. Though similar productivity analyses have been made on a country level, little research is devoted to state-level healthcare efficiency analysis. Hence, the aim of this exercise is to compute the so-called technical frontier also known as the best practice frontier which represents maximum obtainable output given inputs. The difference between each state’s health level and its potentially attainable maximum denotes a given state healthcare inefficiency. The Stochastic Frontier approach used in this article allows the computation of efficiency scores as well as accounting for random disturbances in the data.

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