Determinants of soft budget constraints: how public debt affects hospital performance in Austria

Berger, Michael, Sommersguter-Reichmann, Margit and Czypionka, Thomas (2020) Determinants of soft budget constraints: how public debt affects hospital performance in Austria. Social Science and Medicine, 249. ISSN 0277-9536

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Abstract

Soft budget constraints (SBCs) undermine reforms to increase hospital service efficiency when hospital management can count on being bailed out by (subnational) governments in case of deficits. Using cost accounting data on publicly financed, non-profit hospitals in Austria from 2002 to 2015, we analyse the association between SBCs and hospital efficiency change in a setting with negligible risk of hospital closure in a two-stage study design based on bias-corrected non-radial input-oriented data envelopment analysis and ordinary least squares regression. We find that the European debt crisis altered the pattern of hospital efficiency development: after the economic crisis, hospitals in low-debt states had a 1.1 percentage point lower annual efficiency change compared to hospitals in high-debt states. No such systematic difference is found before the economic crisis. The results suggest that sudden exogenous shocks to public finances can increase the budgetary pressure on publicly financed institutions, thereby counteracting a pre-existing SBC.

Item Type:	Article
Additional Information:	© 2020 The Author(s).
Divisions:	Systemic Risk Centre
Subjects:	H Social Sciences > HB Economic Theory R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
JEL classification:	H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management
Date Deposited:	30 Sep 2022 14:39
Last Modified:	28 Mar 2024 20:03
URI:	http://eprints.lse.ac.uk/id/eprint/116865

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