Allocative Inefficiency of General Hospitals in Poor Countries: A Case Study of Uganda

The increasing costs of healthcare arising largely from the growing population and emergence of non-communicable diseases have exerted pressure on healthcare budgets in poor countries. With a funding gap of 7% to realize WHO recommended target of 15 percent of GDP in Uganda, there is a need for hospitals to be efficient in allocation of financial resources in order to provide the required level of healthcare services. Most studies on Uganda have focused on the technical inefficiency of general hospitals and evidence on their allocative inefficiency is limited. Understanding the sources of inefficiency in the allocation of finances in general hospitals in Uganda is important to improve their performance. The purpose of this study was to determine the allocative inefficiency of the general hospitals in Uganda in order to provide a source of misuse of public allocations to a particular general hospital. Panel data from 22 general hospitals for the period 1997-2007 were used. Allocative inefficiency was estimated using Stochastic Frontier Analysis. The findings show that general hospitals are systematically allocatively inefficient in distributing the public funds given to them. The allocative inefficiencies value is high on payments of employee benefits (34.8 percent), followed by the purchase of drugs (29.2%) and lastly, costs on utilities like electricity and water (14.1%). To address the existing allocative inefficiencies, general hospitals in Uganda can improve the process of hiring of labour and management of staff payroll; monitor procurement of drugs, and reduce wastages in the use of utilities.

Allocative Efficiency Analysis of Capsicum Cropping System under Tunnels

The focus of this study was to analyze the allocative efficiency of the capsicum cropping system under tunnels. The data is collected from those farmers that were cultivating the capsicum crops under the tunnels in Pakistan. Cultivation of the crops under tunnels has a rising trend in Pakistan. To achieve the best possible output with a minimum cost of newly opted farm technology can be beneficial if farmers have proper skill and know-how regarding the application of balanced use of inputs. The sample size was around 150 capsicum farms. The Stochastic Frontier Analysis (SFA) was used to examine the allocative efficiency of capsicum farms in Pakistan. The result of the study demonstrated that the average allocative efficiency of capsicum cropping systems under tunnels in Pakistan was around 65%. Around 35% of allocative inefficiency is present in the capsicum cropping system. Mismanagement of resources related to the utilization of farm inputs i one of the main reasons for allocative inefficiency. After removing the mismanagement of resources, most farms have another way of reducing allocative inefficiency. It is linked with reallocating inputs or changing the input combination used, to achieve an optimum level of capsicum output at a given level of input prices. Hence, the objective of adoption of advanced farm technologies along with balanced application of farm inputs will result in higher farm productivity and allocative efficiency.

The X-Efficiency of Syariah and Conventional Bankings in Indonesia

This paper investigates the X-efficiency of fifteen commercial banks in Indonesia consisting of seven syariah banks and eight conventional banks. This study uses three stages of data analysis: non-parametric data envelopment analysis (DEA) approach, t-test, and multiple regression method. The results show that in the period of this study, both syariah and conventional banks in Indonesia have not reached the optimal level of efficiency. However, conventional banks obtain a higher level of allocative and total efficiency compared to syariah banks. The inefficiency of Islamic banks is stemed from allocative inefficiency rather than technical problems. The bank’s X-efficiency is significantly influenced by size, rather than number of banking channels and staff costs. This study provides important implications for syariah banking in order to improve X- efficiency and compete in the banking industry in Indonesia by focusing on the improvement of the combination of quality assets.

Estimating Islamic Banks’ Technical and Allocative Inefficiencies: A Shadow Cost Approach

The main objective of the present paper is to empirically analyze the efficiency of 26 selected Islamic banks from different countries, namely: Bahrain, Jordan, Kuwait, Malaysia, Pakistan, Qatar, Saudi Arabia and UAE. The data used covers the period of 2012‒2016. To measure the banks’ efficiency, we used the frontier-based efficiency methodology, which was especially developed in the presence of panel data. In this respect, the panel data provided us with a fruitful framework for analyzing the efficiency. Therefore, the method employed was the shadow cost frontier based on the estimation of parametric cost inefficiency and its decomposition into both technical and allocative inefficiencies. The findings showed that the Islamic banks are costinefficient. With regard to the allocative inefficiency, it can be explained by excessive use of capital relative to labor, accompanied by an overuse of financial resources in terms of labor. The present study also revealed that the financial factor is overused, relative to the physical capital. Furthermore, technical inefficiency appears to be the second source of cost inefficiency as far as the Islamic banks are concerned. Overall, the findings indicate that the Islamic banks must improve their use of resources by about 43.7 percent for achieving efficiency.

Identifying Sources of Inefficiency in Healthcare*

In medicine, the reasons for variation in treatment rates across hospitals serving similar patients are not well understood. Some interpret this variation as unwarranted and push standardization of care as a way of reducing allocative inefficiency. An alternative interpretation is that hospitals with greater expertise in a treatment use it more because of their comparative advantage, suggesting that standardization is misguided. A simple economic model provides an empirical framework to separate these explanations. Estimating this model with data for heart attack patients, we find evidence of substantial variation across hospitals in allocative inefficiency and comparative advantage, with most hospitals overusing treatment in part because of incorrect beliefs about their comparative advantage. A stylized welfare calculation suggests that eliminating allocative inefficiency would increase the total benefits from the treatment that we study by 44%.

Empirical Analysis of Railway Efficiency in Pakistan

This paper estimates change in Pakistan Railways (PR) efficiency over time. It is important to see the performance in a dynamic context. Based on the fundamental CCR-BCC (Charnes, Cooper and Rhodes, 1978; Banker, Charnes and Cooper, 1984) model, we use an extended Data Envelopment Analysis (DEA) model developed to deal with time series method for the period 1966-2017. The PR became financially inefficient from 1985 onwards. Fewer and redundant inputs were used for service delivery which caused product inefficiency. Rising expenditures increased cost of operations which became the source of allocative inefficiency. Both resulted in train closures and shrinking business. Our results show pure technical efficiency of production at 69 per cent, indicating the output waste of 31 per cent. The empirical findings suggest that the pure technical efficiency of production outweighs the pure technical efficiency of allocation. The main policy implication is that steady investment under an autonomous and professional management is required for a turn around. Keywords: Efficiency, Data Envelopment Analysis, Pakistan Railways, Transportation Policy